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How Are Money Back Plans Different From Endowment Plans?

Published On Jan 13, 2022 10:30 AM By InsuranceDekho

Despite the fact that endowment and Money Back plans have been around for a long time, many insurance buyers are still confused about their benefits and applicability. What's the main difference between an endowment and a Money-Back plan? The survival advantages are the most significant distinction. When the policy matures, the endowment plans pay the money, including the sum assured and bonus. Money-back policies, on the other hand, payout money to the assured at regular intervals over the course of the policy as a specified percentage of the sum assured. When the money return insurance matures, the balance sum is guaranteed, and bonuses are paid out. In the event of a death claim, both endowment and money-back plans pay the sum assured to the assured.

How Are Money Back Plans Different From Endowment Plans?

Endowment Plan vs. Money Back Plan

The primary distinction between a money-back plan and an endowment plan is that a money-back plan provides an individual with a specific sum assured percentage at regular intervals. When discussing an endowment policy, an individual receives the sum assured as well as the bonus at the end of the policy term. In the event of the policyholder's untimely death during the policy term, the nominee receives a death benefit in the form of the sum assured plus any applicable bonus.

The following are some of the key distinctions between a money-back plan and an endowment plan:

1. Benefits of Term and Maturity

If the policyholder survives the period, they are paid the sum assured plus any applicable bonuses at maturity. There are no payments required for the duration of the plan. The policyholder will receive a percentage of the sum assured at predetermined intervals throughout the policy. If the policyholder lives to the end of the term, the balance sum is guaranteed, as are any applicable bonuses.

2. Death Benefit

If the policyholder dies during the term of the contract, both endowment and money-back policies will pay the promised sum plus any applicable incentives. In a Money Back policy, regardless of the installments already paid out, the full sum assured is paid out on death. As a result, MB plans become more expensive.

3. Suitability

Endowment policies are ideal for people who want to accumulate assets for long-term financial goals such as homeownership, paying for their children's higher education or marriage, retiring, and so on. A money return policy is ideal for people who require a consistent source of income to meet short-term financial objectives such as EMIs, school fees for their children, household expenses such as rent or other bills, and so on.

4. Loan Facility

Endowment insurance can be used as collateral to obtain a loan because the money guaranteed is only paid as a lump sum at maturity. A loan cannot be obtained against a money-back plan because a percentage of the sum assured is constantly deducted over the term of the policy.

5. Risk And Premium

Given the benefit of survival/maturity, the risk of either approach is negligible. Endowment and money-back policies, on the other hand, have higher premiums than standard term policies for the same reasons.


Endowment plans, as we have seen, do not produce high returns. Money-back programs offer much lower returns. Money-back programs, on the other hand, have set financial objectives. Money return programs are intended to generate cash at predetermined intervals in order to cover predetermined expenses. Investors should evaluate their financial situation before investing in either an endowment or a money-back plan. In the next post, we'll look at how reinvesting money received during the policy term can help us get better returns on money-back plans.

You may also like: A Quick Guide To Money Back Policies

Aspects To Know Before Buying A Money Back Policy

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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