Difference between Endowment Plan and Money Back Plan

You may find yourself in the crossroad to choose between two insurance plans - endowment plan and money back plan. Both of them act as insurance policies presenting dual benefits of life insurance and savings. To untangle your mind from the thoughts of choosing the right one, go through the rest of the article.

Every insurance purchase is a difficult decision and there are numerous products available in the insurance industry providing enticing offers. Endowment policy and money back plan are traditional insurance products that help the user in savings and insurance. However, survival benefit draws the line between two of the products. In order to secure your life for long-term and short-term, it is essential to know the difference between money back plan and endowment plan.

What is an Endowment Policy?

The endowment policy definition is related to maturity benefit which is present after a certain period and it is generally a regular term policy. If you had to pay a certain amount of expenditure over a period, you can get lump sum money on maturity. This only happens when the policyholder survives.

The company pays the sum assured along with additional bonus on the sudden demise of the policy holder. In addition, the endowment policy is widely helpful when you are trying to get financial security for future expenditure.

The non-profit endowment, with-profit endowment and unit linked endowment plans are three types of plan. If you choose to take advantage of the endowment policy, you can get endowment plan rider benefits such as waiver of premium, accidental death, critical illness and hospital cash benefit.

Following are the features of the policy-

• Flexibility cover
• High returns
• Death and survival benefit
• Low risk
• Tax benefits under Section 80C and Section 10(10D)

Why should you invest in Endowment Plan?

With this type of plan, you need to wait for 15 years in order to get the investment benefit. The ULIP is a qualified endowment plan for which you can pay the premium over the years in your favourable funds. When the cost is deducted, the fund value is present to you in the form of maturity benefit.

In non-participating endowment plan, there is a specified maturity benefit and it comes with guaranteed investment benefit. In addition to the context, the participating endowment plan lets you select a guaranteed benefit payable on maturity or death.

What is Money back Policy?

The money back policy details indicate that the service user acquires a certain percentage of sum assured throughout the intervals. However, there is a provision of getting a lump sum when the policy term ends. Yes, it is similar to an endowment policy, but has the advantage of liquidity. Reducing the risk for the policy user via the insurance plan, the money back guaranteed policy can also keep up liquidity over the period.

If the policyholder passes away, the nominee receives the sum assured. There is no deduction of survival benefit from the payable sum assured. Money back policy is ideal for a person who needs money at a specified regular interval. It is great way to deal with the expense related to a child’s education. The instalments are tax-free and so are the paid premiums.

The best money back policy acts as a saving plan and there is a maturity benefit along with a bonus. As there are regular ups and downs in money matters in the world, the corpus of this type of plan contributes to prosperity and growth. The money back plan is a safe and secure option for people for searching a life cover along with definite sum assured and returns on the demise of the policyholder.

Following are the features of the money back policy in India

• Risk-free returns
• Liquidity
• Survival benefits

Why should you invest in Money back Plan?

The traditional policies present the returns of the money back scheme. When it is a participating fund, it is eligible for annual bonuses. The plan pays a percentage of sum assured at standard intervals during the policy term.

This plan is widely popular and the non-participating scheme has been proven to be effective as well. The payouts can be indicated by an amount of sum assured or premium. However, the offers in the money back scheme can present investment benefits at an early stage, but the return on the plan is lower compared to the return of the endowment scheme.

Understanding the Difference

Death benefit in endowment plan and money back policy pay the sum assured and it is eligible for bonuses if required. This is only applicable during the policy term. This is the similarity between the two plans. However, when it comes to benefits receipt, the sum assured and additional bonuses are paid in the endowment policy on maturity only when the service user is alive.

For example, in a 25-year long money back plan, one can expect a part of the sum assured after completing 5 years. You may receive 15% of sum assured after completing 5, 10. 15 and 20years from the buying the policy. The remaining 40% and the accrued bonus may be applicable after completing 25 years.

The money back policy maturity amount receives a certain percentage of sum assured over a regular period. The applicable bonuses and sum assured are paid when the term of the policy expires.

If a person looks for savings through investments, the endowment plan can gather savings by catering to the long-term financial requirements. For catering to the short-term financial goals, the money back policy insurance is great.

Money back policy with profit is one-step forward, as it can offer money when the user needs it the most. Empowering the customer, the money back scheme gives access to funds during a crucial need.

Before you take the final decision of purchasing money back or endowment plans, you should take a look at the investment objectives. The comparison is another key to bag the advantages along with rider benefit, before choosing the ultimate plan. Two of these policies are good and it is highly dependent on your investment to acquire fruitful gains.

Hi this is Somesh from Mumbai. I am working with the one of the leading online insurance broking firm as a customer relationship manager. I like to discuss with customer to solve their problem and queries. More Peoples still unaware about insurance