Know The Difference Between Endowment and Money Back Plan

Updated On Jul 29, 2021

Endowment and Money Back Plans are similar in the sense that both of them provide a dual benefit of life insurance coverage along with saving schemes. But when we look closely into it,both of them offer different benefits to the policyholders in their own ways. Before diving into the differences between these plans, let us have a brief introduction of each of them.

What is an Endowment Plan?

An Endowment Plan is basically a life insurance policy which pays a lump sum amount to the policyholder after the maturity of the term or in case of any unfortunate event to the policyholder. The lump sum it offers can be used to fulfill the long term goals of the policyholder like child education or marriage, retirement plan, buying a car etc. If the policyholder fails to survive the tenure, the sum assured and bonus(if any)is delivered to his/her nominees. It is most suitable for those persons who need to instill savings habits along with securing the future of their family.

What is a Money Back Plan?

Money Back Policy is also an endowment plan but with the benefit of liquidity. This plan provides the policyholder with a percentage of the sum assured at regular intervals instead of paying the lump sum at the maturity period. These periodical payouts which are offered especially in this plan are known as Survival Benefits. The rest of the sum assured is paid to the policyholder after the maturity of the term or to his/her nominees in case of his demise.

Differences Between Endowment and Money-Back Plans

Criteria	Endowment Plan	Money Back Policy
Meaning	An endowment plan is a life insurance policy that promises to pay a lump sum amount to the policyholder on the maturity of the policy or to the nominees (if something unfortunate happens to the policyholder). The lump sum includes the sum assured and bonus(if any).	A Money-Back plan is a life insurance plan which pays a certain percentage of the sum assured to the policyholder at regular intervals during the Policy tenure. It has dual benefits of life coverage along with a savings scheme.
Benefits	The sum assured and bonuses(if any), payable after the maturity of the policy or on the death of the policyholder.The sum assured and bonuses(if any), payable after the maturity of the policy or on the death of the policyholder. Thus, they are purely useful to meet long term goals after a certain period of time like buying a car, building a house, going on a world tour etc.	A percentage of sum assured is paid at certain regular intervals and the balance amount is paid after maturity. Therefore, the money received at regular intervals can be useful to meet short requirements. The money invested in this can be partly useful for child education at one age and for their marriage after a few years etc.
Tenure	10 - 35 years	5 - 25 years
Loan Facility	Can be useful as security to obtain a loan.	It cannot be used for any kind of mortgage as a portion of the sum assured is constantly deducted in the form of survival benefits.

Also, the endowment plans are riskier than the money back plans. Moreover, the survival and mortality advantages are higher in an endowment plan compared to the Money back plans that too at a lower premium.

Conclusion

After having a balanced outlook on both the plans, we can conclude that both have their own set of advantages and disadvantages. Therefore, it is upto the individual to choose which plan is most suitable to him/her on the basis of their goals, requirements,circumstances, income and financial stability.