When one is considering purchasing a life insurance policy, there are many options one comes across. Two such options that most people come across are Endowment plans and money back options. These are two types of life insurance policies that combine the benefits of life insurance and savings plans. The many similarities between these two products make the picking process difficult. In this article, we will make choosing either the plan smooth.
Benefits of Money-Back Life Insurance
Term plans with money back offer full protection and guarantee that you will receive a part of your premium back as a survival benefit, which can help you achieve your financial goals. Here are some of the other benefits of choosing to buy the money saving plan:
Provides financial security: The key advantage of investing in a money savings plan such as money back plan is that it provides financial stability for the policyholder’s family in the event of their untimely death. The lump sum payment received by the nominee might be used to repay debts, cover daily expenses, or invest in the future.
Offers regular payouts: Unlike standard term insurance plans, which only pay out a lump sum amount in the event of the policyholder’s death, a money savings plan offers recurring payments throughout the policy term. These sums serve as a safety net and can be used to cover financial obligations or crises.
Acts as a savings plan: A money savings plan such as money back plan also serves as a savings plan, allowing the policyholder to build wealth over time. The periodical payments received during the insurance term might be used to achieve short-term financial objectives or reinvested to build wealth.
Tax Benefits: Another advantage of investing in a money back plan is that it provides tax benefits. The premium paid for the policy is tax deductible under Section 80C of the Income Tax Act. Furthermore, paymets made under the plan are tax-free under Section 10(10D) of the Income Tax Act.
Affordable premiums: In comparison to other types of insurance, term policies with money back come with reasonable premiums. The premiums are generally inexpensive, and the policyholder can customize the payout frequency and amount to meet their financial objectives and need.
Benefits of Endowment Plans
Endowment plan are frequently chosen by those who want both life insurance protection and a savings component with the potential for growth. Let’s take a deeper look at the benefits provided by these plans:
Life Insurance Coverage: Endowment plan pays a death benefit to the nominee in the case of the policyholder’s death during the policy term. This death benefit is often a predetermined sum assured, or the amount guaranteed to be paid out.
Maturity Benefit: Endowment plan, unlike term insurance, provides both a death and a maturity benefit. If the policyholder survives the whole policy period, they will receive a lump sum payment that includes the sum assured as well as any earned bonuses or returns.
Savings and Investment Component: A percentage of the premium paid for an endowment plan goes toward assets like bonds, stocks, or other financial instruments. These investments accrue over the policy’s duration, and the policyholder shares in the profits.
Fixed Policy Term: Endowment plans have a predetermined policy duration that can run from ten to thirty years or more. To keep the policy active, the policyholder must pay regular premiums throughout the term.
Premium Payment Options: Premiums for endowment plan can be paid monthly, quarterly, semi-annually, or annually, giving policyholders flexibility based on their financial needs.
Guaranteed and non-guaranteed benefits: The sum assured represents the endowment plan’s guaranteed benefit. In addition, policyholders may receive non-guaranteed benefits such as bonuses or dividends based on the performance of the underlying investments.
Which should I choose: a money-back guarantee or an endowment plan?
You can select either of the two life insurance plans based on the time of your life at which you want financial support.
If you have short-term and immediate goals to achieve and want to get profits as soon as possible, a money-back plan is ideal for you. These could include paying for daily home expenses, repaying a loan, making rent payments, and so forth.
However, if you have long-term ambitions that require constant and higher financing and are willing to wait 10 years or more, an endowment plan will be more appropriate for your needs. These objectives could include paying a child’s higher education or marriage, spending your retirement years in pleasure, or purchasing your dream home.
Bottom Line:
Both money back and endowment life insurance plans allow you to select when you want to enjoy the benefits of your savings. They are safe investments that provide guaranteed returns and benefits at regular times. Money back and endowment plans differ in their aim, payouts, liquidity, and returns. Endowment plans emphasize long-term wealth growth, whereas money-back plans focus on regular income and liquidity. Understanding these differences is critical in making an informed decision that aligns with your financial objectives.
