Endowment vs. Money Back Policy
If you are getting life insurance for the first time, you will come across different types, such as Term Insurance, Endowment Plans, and Money Back Policies. Each has its own benefits and limitations, so it’s important to understand them before making a choice. Term Insurance offers pure life coverage, while Endowment Plans and Money Back Policies combine insurance with savings. The main goal of life insurance is to provide financial security with an affordable premium.
Endowment Plans and Money-Back Plans
Plans that provide life coverage and also act as savings are always liked by policy buyers. But selecting from a number of insurance plans can be a hectic task. Endowment plans and money back insurance plans are two such options.
Nevertheless, there are several similarities as well as differences between the two. One can opt for any of the plans depending upon their preferences. Here are a few comparisons between the two plans.
What Is an Endowment Plan?
An endowment plan is a life insurance policy designed to pay a lump-sum amount after a fixed time period on maturity or in case of death.
The Endowment Plan is for investors who want long-term plans. People who are planning for future events like a retirement plan or the marriage of their children can opt for an endowment plan. This plan has higher premiums but it also pays a handsome assured amount at the completion of the policy term. This secures both savings and provides insurance to the policyholder.
What Is a Money Back Plan?
A Money-Back Plan is a life insurance policy designed to pay a percentage of the sum assured at regular intervals instead of a lump-sum amount in case of maturity or death. It is an endowment plan with the benefit of liquidity.
Those who want to protect their lives along with an investment that provides regular amounts at intervals should opt for a Money-Back Plan. This plan is helpful for short-term investments, like a child's college admission for a particular course. The amount of money paid at intervals motivates the policyholder for planning small family activities and boosts them in progressing in life with the help of regular income. So, individuals with such plans can opt for a Money-Back Plan.
Similarities Between Endowment Plans & Money-Back Plans
An endowment plan and a money-back plan are both types of life insurance plans. Both plans provide maturity and death benefits. The policyholder can use these plans both as an investment plan and an insurance plan.
Moreover, the sum assured is paid both in case of death and survival in an endowment plan. Because of the additional features provided by both, the premiums are higher than normal plans. Both plans are not dependent on the market, unlike ULIPs. The risk in both plans is a bit low because the amount the policyholder invests is at a fixed rate, which is agreed upon beforehand at the time of buying the policy.
Differences Between Endowment Plans & Money-Back Plans
The difference between an endowment plan and a money-back plan is that in an endowment plan, one gets the sum assured and the bonus at the completion of the maturity period. Whereas in a money-back plan, the policyholder gets a percentage of the sum assured at regular intervals. The death benefit is in the form of the sum assured and applicable bonuses in case the policyholder dies within the policy term.
The table mentioned below highlights a few of the differences between an endowment and money-back plan:
| Criteria | Endowment | Money-Back |
|---|---|---|
| Definition | It is an investment and insurance policy. | It is an investment and insurance policy, participatory in nature. |
| Benefits | Sum insured and bonuses, if any, paid after the completion of the policy. | A percentage of the sum assured is paid at regular intervals. |
| Tenure | 10 years to 35 years | 5 years to 25 years |
| Loan Facility | It can be used as security to obtain a loan. | It is not subject to any kind of mortgage as a portion of the sum assured is constantly deducted. |
Conclusion
The above-mentioned facts should be helpful to you in opting between an endowment plan and a money-back plan. So, you are free to choose one of the life insurance plans depending upon your preferences.
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