How Is Traditional Life Insurance Different From Money Back Plans?

Benefits Of Buying A Term Insurance Plan
Benefits Of Buying Money Back Plan
Take Away

Money back plans are life insurance cum investment plans under which the life assured gets a part of the whole sum at every regular interval and not a lump sum amount at the end of the term. These types of plans are best suited for those who want to save their money through insurance and at the same time want to maintain liquidity throughout.

Life Insurance plans, on the other hand, are pure protection plans which provide life assured and his family with financial coverage in case the life assured meets an unfortunate event. On purchasing a life insurance plan the life assured gets the life coverage or the sum assured in case the life assured dies while the policy is still active.

The benefits of both money back plans and life insurance plans are discussed shortly.

Benefits Of Buying A Term Insurance Plan

The benefits of purchasing a term insurance plan are listed below:

Life Cover

Incase of an unfortunate demise of the life assured, the family gets a lump sum amount as the death benefit to stay financially sound. The family can opt to choose what form they want the payout, either lump sum amount all at once or an income annually or monthly.

Affordable Premiums

One can get a high valued life coverage from term plans by paying a very low premium. Premiums can be paid yearly or mid yearly or monthly, depending on the policyholder. The earlier one buys a term plan the lower he or she has to pay the premium.

Critical Illness Coverage

In case of serious illness coverage included in the buy one buys, he or she is assured to get a lump sum amount during the treatment of a critical illness under most of the term plans either by default or by way of a rider option. This makes it more advantageous for the purchase to purchase it.

Tax Benefits

You can get tax benefits on premiums paid under Section 80C along with premium paid towards critical illness benefit under Section 80D of the IT Act. The lump-sum amount received by nominees as the sum assured/death benefit is also exempted from taxes under Section 10 (10D).

Benefits Of Buying Money Back Plan

Here are some benefits listed that one gets on buying a money back plan:

Provides Survival Benefits

A money back plan gives the life assured a part of the sum assured at regular intervals. These payouts are known as survival benefis. Along with that regular sum, these plans also provide the life assured with maturity benefits as well as bonus (if any) at the time of plan maturity.

Provides An Insurance Cover

Although seen as an effective investment product, a money back plan is also an insurance instrument. You can choose a suitable cover that can be used to meet the monetary requirements of your loved ones in your absence. Such plans bring in reliability and let your family members live a dignified life even when you are not around them.

Risk-Free Return

Money back plans are ideal for those who do not want any form of risk in their return policy. As there is no risk involved in these plans one can freely opt for money back plans.

Provides Tax Benefits

The premiums paid under this plan are deductible under Section 80C of the Income Act 1961. However, the premium must be less than 10% of the sum assured of the policy. The sum assured receivable under the plan is tax-free under Section 10 (10D) of the Income Tax Act 1961.

Take Away

A life insurance plan gives death benefits, maturity benefits, optional death and disability benefits on purchasing. A money back back plan helps one to meet the requirement of regular flow of money over a period of time. Both are beneficial in their own ways. This article clearly has stated all the benefits one gets on purchasing either life insurance plan or money back plans.