Money Back Policy Or Term Life Insurance? Which Is A Better Option?

Term insurance plans and Money Back policies are two types of insurance policies offered by insurers, such as banks and insurance firms. Each has its own set of perks, drawbacks, and tax advantages. Knowing the differences in features and advantages between two or more insurance policies is essential when making a decision. Because term insurance and Money Back plans provide comparable advantages, many consumers are perplexed and find it difficult to choose which product is best for them: a Money Back policy vs. term insurance. This article compares and contrasts the characteristics of both products to help you understand them better.

What is the Difference Between Term Insurance and a Money Back Guarantee Policy?

While each of these plans provide life insurance coverage, the terms and money return policies differ. Because of these distinctions, it is critical to understand the specifics of the chosen insurance plan before making a selection.

We've produced a list comparing Money Back policies vs. term insurance based on the following elements to assist you navigate through the differences.

1. Extensive coverage

If the policyholder survives the insurance period, the premium is refunded. Guaranteed income plans can be thought of as Money Back policies.

A Money Back policy holder's family, on the other hand, will get the sum promised, plus interest and bonuses, if he or she dies. Term plans only guarantee the amount guaranteed under the policy, with no interest.

2. Return on Investment (ROI)

You will not earn any monetary advantage if you outlive the term plan's duration. You will also not get the policy's promised payout. Money Back insurance, on the other hand, will give you a lump sum payout of the amount promised if you survive the policy's term. Term insurance, on the other hand, does not have investment rewards because it is only a protection plan. Money Back policies clearly outperform term insurance in terms of return on investment.

3. Financial Assistance

Money Back Policies pay out at predetermined times. As a result, you may use this money to help support your family's costs during this time. However, because term plans do not pay out throughout the policy's term, you will not receive any financial assistance during the policy's term.

4. Tax Advantage

The main difference between a money return policy and term insurance is that both give tax benefits. The premium paid for any life insurance policy may be excluded from taxation under section 80C of the Income Tax Act of 1961. For such insurance, the maximum exemption amount is INR 1.5 lakh.

5. Cancellations

If you do not pay your premium by the due date, your term plan will be immediately cancelled, and you will not get any payments. A Money Back insurance, on the other hand, allows you to cancel the policy and reclaim the sum promised for a small cost.

Conclusion

After looking at the differences between term insurance and money back plans, it's clear that each has its own set of benefits. A term plan, on the other hand, is preferable than a Money Back insurance, according to numerous financial experts, because it gives a bigger sum promised.

Also read - What Is Money Back Plan? Key Features And Benefits

Is Money Back Policy The Best Investment Option?

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.