People are frequently caught between a money back policy to safeguard their families and an insurance plan that benefits them while they are living. It is undeniable that there is no winner in this confusion because everyone has different needs and wants to invest in a scheme that serves all of them effectively. While we all want our insurance plans to protect our families to the fullest extent possible, the choice between a money-back policy and paying all of our premiums so that your family can be secure in your absence is one we must make once we understand the benefits and drawbacks of each. Let’s look at the differences between life insurance with a money back policy and one without, so you can make the best option!
What is a term plan?
Term life insurance policy is the most basic type of insurance. If you die unexpectedly during the period of your policy, the insurer will pay a predetermined amount to your family, ensuring that your loved ones are well cared for and have appropriate financial support. This allows them to manage their expenses using the death benefit.
What is a money-back policy?
A money back policy is an endowment plan that combines investment and insurance into a single plan, with the policyholder receiving an aggregate sum known as the survival benefit at certain intervals. The final payment is made around the end of the plan’s term.
Apart from the survivor benefit, the policyholder receives incentives throughout the policy’s duration. If a policyholder dies while the policy is still active, the beneficiaries are liable for the death benefit as well as any incentives received throughout the policy’s duration.
Benefits of Money Back Policy
A money back policy, as the name implies, returns money in the form of consistent payouts over the policy term specified by the insurance company. The life insured may get a lump sum payment upon maturity. Money-back policies have several advantages, some of which include.
Provides liquidity and consistent payouts: The fundamental benefit of the Money Back Policy is that it provides consistent payouts, sometimes known as survival benefits. At maturity, the remaining benefits are paid.
Additional advantage: Some money back policies may additionally include guaranteed additions to coverage or further money-back as extra perks.
Tax advantages: Premiums paid for a money back policy may qualify for a tax deduction of up to ₹1.5 lakh under section 80C of the Income Tax Act, 1961.
A safe investment: Since the returns are guaranteed, they are secure investments regardless of market conditions or the position of the government. There are no risks involved with reinvesting; whatever the insurer has agreed to pay you in writing will be paid out at maturity. As a result, it safeguards the money you have while keeping the overall risk of your portfolio low.
Risk-free investment: Some money back policies may additionally include guaranteed expansions to coverage or further money-backs as extra perks. In contrast, stock market swings have a direct impact on other financial assets such as bonds and mutual funds. The Money Back Policy is a low-risk instrument that provides guaranteed returns at predetermined periods throughout the tenure.
Life coverage: It is a life insurance policy with a number of alternatives to meet your family’s financial needs. This technique allows your family to live a dignified life without you.
Parameters to Compare Between Life Insurance Policy and Money Back Insurance Policies
Life insurance coverage
Without Money Back: In the tragic event that the policyholder dies, the family is entitled to a lump sum called a death benefit. Loved ones are liable to ask for compensation be given in a single lump sum, monthly, or yearly.
With Money Back: For the same cost, a money back insurance plan gives less coverage to the family because it is primarily for the insured while they are living.
Tax Benefits: Sections 80C and 10(10D) of the Income Tax Act of 1961 treat money-back term insurance plans and non-money-back policies equally, allowing both to benefit from tax savings.
Investment Compensation
Without Money Back: It does not pay out when it matures. This means that even if the policyholder survives the period, no money will be paid to them or the named beneficiaries. Unless a person chooses an insurance policy that includes a premium return, in which case the policyholder is refunded for the interest paid at the end of the policy’s term.
With Money Back: If a person lives the specified period under a money back life insurance plan, they will receive a portion of the sum assured in money-back payments. Bonuses are also accessible to life insured when they are released on a regular basis. These bonuses are collected over the policy’s duration and are paid out with the final payment under the money return plan.
Conclusion
To summarize, life insurance policy with or without a money back policy is a good insurance policy. Before making a decision, you must first assess your financial needs, analyze various financial instruments, and select the best plan for you and your family.
