When you are buying an insurance policy for the first time, you might come across two options. There are term policies as well as money back insurance policies. Both have their own advantages and disadvantages. You should be aware of their features, benefits and other important factors before choosing the plan. The very basic purpose of life insurance should be fulfilled by paying an affordable premium. Endowment and money back policies also provide savings. However, there are a few small differences between these two life insurance products. You should understand these differences in order to buy the best insurance plan.
Money back policy
In case of money back life insurance policy, the insurance company will pay money at regular intervals as per the terms and conditions of the policy.
The greatest advantage with the term policy is that the premium will be very low and the benefits is very high. Hence, no returns are promised if the policyholder survives.
Purpose of the insurance policy
A pure insurance policy covers risk. If you would like to cover the risk to the maximum potential extent, you should not consider it from an investment point of view.
The very purpose of a life insurance product is to replace financial loss. As it is not possible to prevent the loss of life, you should take steps to offer stability to your family or dependents. The financially dependent children, spouse, and parents should have access to funds after the demise of the breadwinner. A pure insurance policy will offers benefit. Even though you cannot help them with the emotional loss, you can ensure that they aren’t subject to any financial loss by choosing an appropriate insurance plan.
Benefits of endowment plans
Benefits of money back plans
The policyholder will get a fixed percentage of the sum assured at regular intervals. The balance sum assured and bonuses (if any) will be paid at the end of the term.
If the policyholder dies during the policy period, the sum assured will be paid to the nominee or beneficiary along with the applicable bonuses.
The money back policy is ideal to fulfill your short-term financial goals. The key events in your children’s lives such as marriage and education will be borne by the insurance policy.
Types of bonuses
As per the policy wording, you will be eligible for guaranteed bonuses and other types of bonuses as per the performance of the insurance company.
Comparison of insurance products
If you are interested in buying a money back or endowment policy, you should compare various policies and their returns. You can go through the official website to understand the bonus earning potential so that you can maximize the yield. As per the directions of the IRDAI (Insurance Regulatory and Development Authority of India), the life insurance company should provide complete information about the policy and its returns so that customers can choose the best policy as per their needs.
An endowment policy offers death benefit, maturity benefit and participation in profits of the insurance company as per the terms and conditions mentioned in the insurance policy. You can also get optional death and disability benefits by purchasing an endowment policy. You can choose a money back plan if you require a regular flow of money over a period of time. However, the returns will be lesser than in an endowment policy. You can choose various riders to enjoy special benefits and to cover the risk to the optimum potential extent.