Money Back Plan V/S Endowment Plan: Which Is Better?

According to the terms and circumstances of the insurance policy, an endowment policy provides a death benefit, a maturity benefit, and a share of the insurance company's earnings. By acquiring an endowment policy, you can also earn optional death and disability benefits. If you require a consistent flow of funds over a long length of time, a money-back plan is an option. The returns, on the other hand, will be lower than under an endowment policy. You may pick from a variety of riders to get additional benefits and to cover your risks to the fullest degree possible.

What Are Money-Back Plans, And How Do They Work?

A money-back plan ensures that the money invested will be repaid with assured growth at regular intervals over the policy's term. The money-back amount is determined as a proportion of the total guaranteed. These payments are known as survival benefits since they are made on a regular basis. These payments are made throughout the policy period, with the remainder of the sum guaranteed paid to the policyholder at plan maturity. If the policyholder dies during the policy term, the sum guaranteed is paid to the nominee, regardless of whether or not periodical survival benefits have been paid. They give a life cover for the life assured during the policy term since they are a sort of life insurance plan.

What are Endowment Plans And How Do They Work?

Endowment Plans guarantee to pay a lump-sum payment after a set length of time, whichever comes first, in the event of the policyholder's death or maturity. Endowment plans offer both life insurance and the ability to invest for the future. This plan guarantees asset appreciation through monthly bonuses and a terminal bonus, in addition to the sum assured on the policyholder's death or plan maturity.

What Is the Difference Between Money-Back And Endowment Plans?

Money-back plans may appear to be similar to endowment plans, but they are not. Some of the key distinctions between the two types of plans are mentioned below. Read the entire article to see how money-back plans vary from endowment plans.

1. Benefits Of Time And Maturity

The amount guaranteed and appropriate incentives are given to the insured individual at the time of maturity if they outlast the insurance term under an endowment plan. There are no provisions for payments throughout the endowment plan.

A money-back policy, on the other hand, pays out a portion of the sum assured at pre-determined intervals during the policy term. Furthermore, if the policyholder outlives the policy term, the insured person will get the remaining sum assured at maturity.

2. Benefits Of Mortality

If the insured individual leaves within the policy's term, the endowment policy and the money-back plan will pay the promised amount plus applicable incentives. In a money-back plan, however, in the event of the policyholder's death, the whole sum promised is paid to the insured person's dependents, regardless of the premium instalments paid.

This is the element that distinguishes an endowment from a money-back plan, and it is also the reason that a money-back plan is slightly more expensive.

3. Suitability

An endowment plan is a way for people to save money for all of their long-term financial objectives, such as buying a house, paying for their children's higher education, or retiring.

Money-back insurance, on the other hand, is ideal for those who want a consistent income stream to meet all of their short-term financial goals, such as paying EMIs, home expenditures, children's school fees, and so on.

4. Risk

When compared to money-back insurance, the risk associated with endowment programs is quite modest. In addition, the survival and mortality benefits of an endowment plan are greater, and at a smaller premium payment.

Conclusion

After going over all of the advantages and disadvantages of money back vs. endowment plans, you should be able to see that both endowment plans and money-back policies have their own set of benefits and drawbacks. However, some modern investors believe that an endowment policy is somewhat superior to a money-back program.

Also read - How to Choose a Good Money Back Insurance Policy?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.