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Differences Between Money Back Policy and Term Insurance

Published On Oct 16, 2021 1:00 PM By InsuranceDekho

Has one of your friends recommended you a term insurance plan? Were you planning to buy a money back policy initially? If you are feeling confused between a money back policy and term plan, it would be best to uncover their differences to develop a better understanding of the ideal option to go with. Needless to say, money back policies and term insurance plans have significance of their own. While term insurance is a pure protection plan, which offers financial support to the family members of the policyholder on the death of the latter, a money back policy is the ultimate combination of insurance and investment. That said, let us discuss the aspects that make term insurance and money back policies different from each other. 

Differences Between Money Back Policy & Term Insurance

The significant differences between money back policies and term insurance are mentioned below:

  • Life Cover: Term insurance is renowned for offering a significantly high sum assured in exchange of a minimal premium amount. In simple words, in the event of the unfortunate death of the policyholder during the policy term, the term plan pays the nominees a massive amount as the death benefit. On the other hand, a money back policy does not come with the feature of death benefit, but offers investment options. 
  • Return on Investment: Money back policies come with the feature of investment. Moreover, upon survival of a specified term in a money back policy, a certain percentage of the sum assured is given in the form of payouts. The policyholder is also eligible for certain bonuses accumulated over the period of their money back policy. The accrued bonuses are given back at the time of the final instalment of the money back policy. In case the policyholder dies, these bonuses are transferred to the surviving beneficiaries. On the contrary, since term insurance is a pure protection plan, it does not come with investment benefits. Clearly, return on investment is much better in money back policies than term insurance.  

Whether you go ahead with a term insurance plan or a money back policy, you will reap the benefit of tax exemption. Both belong to the category of insurance products and come with tax saving benefits. Both the policies are eligible for tax exemption under Section 80C and Section 10(10D) of the Indian Income Tax Act, 1961. Under Section 80C, exemption of up to Rs. 1.5 Lakh is allowed. Similarly, under Section 10(10D), proceeds from insurance policies are also exempted from tax. An additional exemption of Rs. 25,000 under Section 80D is allowed towards health insurance-based riders.


So, what are you waiting for? Now that you are aware of the major areas of comparison between money back policies and term plans, it is advised to choose the best according to your needs. If required, you can choose both the policies to reap benefits of both.

Also Read -

Are Money Back Plans worth Buying?

Money Back Plan V/S Endowment Plan: Which is Better

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.

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