Comparing Money Back Life Insurance V/S Term Life Insurance

Term Insurance is the security to your family in case an unfortunate event takes place during the policy tenure. You can get the plan at a nominal premium amount and the sum assured will be paid to the family. The plan is designed to cover the risk of death. If you outlive the policy duration, you do not receive any maturity benefits.

A money back life insurance is an endowment plan, which will provide you with a life cover for a specific term. This plan will give you returns at regular intervals during the policy term. These returns are known as survival benefits. In case something unfortunate happens to you before maturity, your nominee will receive the sum assured irrespective of the survival benefits that were provided to you earlier.

Term Life Insurance V/s Money Back Life Insurance

You need to understand the difference between the two types of insurance plans to make a well-informed decision.

• Coverage

The term plan is a life cover, which provides you high coverage at a low premium amount. Conversely, a moneyback insurance policy has a lower sum assured for the same premium amount. In case of death of the insured, a term plan will pay the lump sum to provide for the financial security of the family members while the moneyback plan will pay the sum assured and the accrued bonus.

• Return On Investment

In a term plan, the insurance company will not provide any survival benefits if you survive the policy term. However, the moneyback plan will return a certain percentage of the sum assured at specific time intervals within the policy term.

•  Tax Benefit

Both the insurance plans offer tax benefits. The premium amounts paid for term life insurance and money back plans are exempted from taxation under Section 80C of the Income Tax Act, 1961. The maximum exemption amount is INR 1.5 lakh. There is no tax payable on maturity benefit, death benefit, or survival benefit.

Conclusion

You need to consider your personal goals and financial requirements when choosing between the two. A term insurance plan is a protection plan and there is no investment component. It will financially secure your loved ones if something untoward happens to you. However, if you are looking for returns from the plan, you need to opt for a money back life insurance policy. It also works as an investment plan in addition to offering an insurance cover. 

Also read: Advantages And Limitations Of Term Insurance

Am I Eligible To Purchase A Term Insurance 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.