Difference Between Money Back Plans and ULIPs

What is ULIP and How do they Work?

ULIP is an acronym for Unit Linked Insurance Plan. These plans are a combination of Insurance Plans and Investment Plans. The Policyholder pays the Premium which is then divided into two parts. One part is used to provide cover to the Insured Person and the remaining is invested in the Market. As the Investment made under ULIP plans is invested in the market that is why the Risk Factor is involved and the Policyholder is the sole risk bearer. The charges related to the Fund Management, Allocation Charges are meant to be paid by the Policyholder and the Policyholder also has the facility to convert their Investment from Debt to Equity or vice versa.

What are Money Back Plans and How do they Work?

The Money Back Plans are an ideal choice for those who are not the risk-taking type and want Guaranteed Returns on their Investments rather than facing any fluctuation that may occur in the Market. The Money Back Plans are also a combination of Insurance Cover and Investment Corpus. The Money Back Plans promise a Sum Assured Amount that is meant to be paid either at the Maturity of the Plan or in case of the sudden death of the Policyholder. 

The Premiums are paid at the intervals of the insured person’s choice. What makes this different from other Insurance Plans is the existence of Survival Benefits which are a percentage of the Sum Assured which are paid at Fixed Intervals so that the Insured Person can use them in case of emergency or save it to increase their Wealth. 

The Death Benefit under this Plan is paid in case of the sudden death of the Policyholder in between the Policy Term and it is paid to the Nominee. The Death Benefit includes the Bonuses as well which are accumulated till the death of the Policyholder but excludes the Survival Benefits.

In this Article, We will discuss the difference between Money Back Plans and ULIPs. 

Key Features of ULIPs

Certain Features of ULIPs are as follows: 

• ULIPs are Flexible

These Plans are Flexible as they allow the Policyholder to choose and change between the various ways of fund Investment. It also allows the Policyholder to make a Partial Withdrawal with some Additional Charges.

• Funds for any Crucial Moment

The need for Money can arise at any stage in life. The Partial Withdrawal Facility offers the option to utilize the funds whenever such a need arises at any critical stage of Life.

• Create a Secure Future for your Child

The Return on Investment that is offered in the ULIPs is Market-Related. These higher returns can help you build a Corpus to meet the financial needs of your Child.

• Secure your Post-Retirement Life

The Returns from the ULIPs as well as the cover works better over the Long Term. If you start investing in the ULIPs at an early age then you can build up Investments that can help you after you Retire.

Key Features of Money Back Plans

Certain Features of Money Back Plans are as follows: 

• Provides Guaranteed Returns

The Money Back Plans do not depend on the fluctuation of the Market. They provide Guaranteed Returns in the form of Maturity, Death, and Survival Benefit.

• Source of Secondary Income 

The Survival Benefits that are paid at Fixed Intervals during the Policy Term act as a Secondary Source of Income. These Monetary Values can be utilized according to the Policy Holder’s preference.

• Maturity and Death Benefits

The Returns under the Money Back Plans are Guaranteed. When the Policy Term ends you will surely get the Sum Assured. In case of the sudden death of the Policyholder, the Nominee will surely get the Lump Sum in the form of a Death Benefit.

• Additional Riders

The Riders provide a comprehensive cover on top of the existing Plan. The Riders such as Accidental Death, Critical Illness, etc will provide you Protection from any Uncertain and Unforeseen Event. 

Conclusion

As you can see, both these Plans have their Benefits, Pros, and Cons. You just need to go through the details and compare each of the plans and choose what suits you the best. We suggest that if you are a risk-taker and want higher returns than ULIP will be the Best choice. But if you are not a risk-taker and want Guaranteed Returns the Money Plan is made for you.

Also read 

How Does Money Back Insurance Policy Work?

Are Money Back Plans Good?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.