Ways In Which Endowment Policies Are Different From Money Back Plans
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Because of the variety of products offered by assurers, deliberate mis-selling of some products by certain insurance intermediaries, and uncertainty regarding certain products, choosing the proper life insurance plan can be a difficult undertaking for insurance purchasers. Term insurance is the purest kind of insurance and should be the first choice for anyone seeking life insurance, as we've mentioned in past insurance-related articles.
Even though endowment and Money Back plans have been around for a long time, many insurance purchasers are still unsure about their benefits and applicability. What is the primary distinction between an endowment and a Money-Back plan? The most significant distinction is in the survival advantages. On the maturity of the policy, the endowment plans pay the money, including the sum assured (or cover) and bonus. Money back policies, on the other hand, repay money to the assured at regular intervals during the policy's duration as a specified percentage of the sum assured (e.g. 5 years). On the maturity of the money return insurance, the balance sum is assured and bonuses are paid out. Endowment and money-back plans both pay the sum assured to the assured in the event of a death claim.
Ways In Which Endowment Policies Are Different From Money Back Plans
Below are ways in which Endowment Policies are different from Money Back Plans:
1. Term And Maturity Benefit
If the policyholder survives the period, the sum assured and any relevant bonuses are paid to them at maturity. During the plan's duration, no payments are required.
Throughout the policy, the policyholder will receive a percentage of the sum assured at predetermined intervals. If the policyholder lives to the end of the term, the balance sum is assured and any relevant bonuses are paid.
2. Death Benefit
If the policyholder dies during the contract's term, both endowment and money-back policies will pay the sum promised plus any relevant incentives.
The full sum assured is paid out on death in an MB policy, regardless of the installments already paid out. MB plans get more expensive as a result of this.
3. Suitability
An endowment policy is best for people who want to build up assets for long-term financial goals such as buying a house, paying for their children's higher education or marriage, retiring, and so on.
A money return policy is ideal for people who need a steady stream of income to satisfy short-term financial goals such as EMIs, school fees for their children, household expenses such as rent or other bills, and so on.
4. Loan Facility
Endowment insurance can be used as security to acquire a loan because the money guaranteed is paid as a lump payment only at maturity.
A loan cannot be taken out against a money-back plan since a percentage of the sum assured is constantly removed over the policy's term.
5. Risk And Premium
Given the benefit of survival/maturity, the risk associated with both approaches is negligible. Endowment and money-back policies, however, have higher premiums than conventional term policies for the same reasons.
Conclusion
Endowment plans do not produce high returns, as we have seen. Money-back programs provide significantly lower returns. Money-back programs, on the other hand, have specified financial goals. Money return programs are designed to generate cash at predetermined times to cover predetermined expenses. Before investing in either an endowment or a money-back plan, investors should assess their financial situation. In the following post, we'll look at how reinvesting the money received during the policy term might help us get better returns on money-back plans.
You may also like to read - Lesser Known Facts About Endowment Policies
Will I Get Tax Benefits With My Endowment Plan?
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.
