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Money back policy & term insurance: which one to buy?

Published On Nov 01, 2021 10:00 AM By InsuranceDekho

Term insurance covers your family if anything tragic happens during the policy's term. For a little monthly cost, you may acquire the plan, and the money promised will be paid to your family. The purpose of the policy is to cover the chance of death. If you outlive the policy's term, you will not get any maturity benefits. A Money Back life insurance policy is an endowment policy that covers you for a specific amount of time. You will get returns at regular intervals during the insurance period. These advantages are known as survival advantages.If you die before reaching adulthood, your nominee will get the sum promised, independent of any earlier survival benefits you received.

Term Life Insurance Plans vs. Money Back Plans

To make an informed selection, you must first grasp the distinctions between the two forms of insurance coverage.

1. Coverage

A term plan is a form of life insurance that provides extensive coverage at a low cost. In contrast, a Money Back insurance coverage provides a lower sum insured for the same cost. In the case of the insured's death, a term plan will pay a lump amount to secure the financial stability of the insured's family, whereas a money return plan will pay the sum pledged plus any collected bonus.

2. Return On Investment

If you outlive the policy term under a term plan, the insurance company will not pay any survival benefits. The Money Back plan, on the other hand, pays out a fixed proportion of the sum insured at predetermined intervals during the policy duration.

3. Benefits From Taxes

Both insurance programs provide tax advantages. Payments for term life insurance premiums and Money Back Section 80C of the Income Tax Act of 1961 exempts Money Back programs from taxation. The maximum amount of tax relief is INR 1.5 lakh. All of the benefits, including maturity, death, and survivor benefits, are tax-free.

4. Benefits Of The Plan

The Money Return Plan offers benefits such as death benefits, maturity benefits, and survival benefits. Term insurance, on the other hand, is a form of policy that pays out if you die. Some term insurance policies contain a maturity benefit. Under the Money Back Policy, a lump-sum payment is provided at regular times. Term insurance death benefits might be paid in one single payment or in monthly instalments.

5. Bonus

Money Back plans are frequent participation plans that allow you to receive a bonus on your insurance. Non-participating term insurance policies are those that don't have any incentives specified on them.


When choosing between the two, keep in mind your co-objectives as well as your financial constraints. A term insurance policy is a form of protection insurance without an investment component. It will provide financial stability to your loved ones if something horrible occurs to you. A Money Back life insurance policy, on the other hand, is the way to go if you want to see a return on your investment. It serves as both an investment vehicle and a kind of insurance. Money Back programs may be able to help those who have already covered their protection requirements and have some leftover income reach their long-term financial objectives. Before making a choice, keep the investment's aim in mind.

Also read - 5 key Tips To Choose A Money Back Plan

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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