Money Back Policy Vs. SIPs - Which Is Better?
Published On Jan 05, 2022 10:00 AM By InsuranceDekho
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A Money Back policy is a type of life insurance that allows the policyholder to receive monthly payments or a lump-sum payout at a preset point throughout the policy's term. The returns on Money Back insurance might be guaranteed, conditional on investment performance, or a combination of both. This allows you to get Money Back insurance that is customized to your individual financial goals.
Investors can contribute a specified amount to a mutual fund of their choice on a regular basis, such as monthly, using a Systematic Investment Plan, or SIP. These payments may start as little as Rs. 500, making them an excellent investment option for both new and seasoned investors. SIPs assist investors in achieving their long-term financial aim of developing a robust portfolio.
What Are the Advantages of a Money Back Guarantee?
There are several advantages to purchasing a Money Back package. The following are some of the reasons why a Money Back plan can be beneficial to you:
- Offers Insurance Coverage
A Money Back plan can be used as both an insurance and an investment vehicle. A policyholder can choose the right insurance coverage to help them fulfil their family's financial obligations. These arrangements provide continuity and enable your loved ones to live happily even if you are not around.
- Provides a Sum That Is Guaranteed
If an unforeseeable event occurs, the insurance company gives the beneficiary a lump sum payment equal to the whole amount covered. This is the maximum amount your family members may utilise to meet their financial commitments while maintaining a decent and acceptable lifestyle.
- Low-key Risk
Market fluctuations effect stocks, mutual funds, equities, bonds, stocks, and other investment vehicles. A Money Back guarantee assures that you will get your funds on a consistent basis. Because they provide insurance coverage and monthly payouts, these plans are simple and reliable. If you want to minimize your risk appetite, it might be a great option for you. These tactics can help you lower your portfolio's risk.
- Take Advantage of Taxes
Section 80 C of the Internal Revenue Code exempts premiums paid for money back programs from taxation. It is, however, subject to the condition that premiums do not exceed 10% of the entire sum assured by the plan.
What Are the Advantages of Systematic Investment Plans (SIPs)?
The benefits of investing with a systematic investment approach are listed below.
- Simplicity Is A Good Investment
One of the most simple and basic methods to invest is through a systematic investment plan (SIP). A Systematic Investment Plan is excellent for you if you are unfamiliar with the financial market and how it operates. All you have to do now is choose a reputable fund and set up standing orders with your bank to manage your SIP investment.
A budget-friendly SIP is a great option for individuals who don't want to invest in mutual funds all at once. You may start investing in a SIP with as little as Rs. 500 each month. It's a low-cost option to invest your money without emptying your wallet. As a result, SIP is appropriate for investors of all wealth levels.People who do not have a steady source of income may benefit from this type of investment. By making little deposits at regular intervals, you may save a percentage of your paycheck.
- Strength of the Compounding Effect
The most major benefit of investing in mutual funds is the ability to build a larger corpus through the power of compounding. You reinvest your earnings in the same scheme when you invest in mutual funds through a systematic investment strategy. Because of the compounding effect, your dividends may earn you more money. When you start investing early and stick with it for a long time, compounding works best.
- Protection Against the Risks of Volatility in the Financial Markets
SIP protects investors against the financial markets' instability. It protects investors against speculative and hasty decisions. When the markets are volatile and dropping, you may buy more mutual fund units at a lower price. As a result, SIP protects investors from speculation while also allowing them to purchase more units at a lower price.
The reasons for investing vary from person to person, based on their financial goals. There are a range of investment solutions available in the Indian market that may help individuals build wealth over time and secure their family's financial future. Choosing the ideal investment option, on the other hand, might be challenging.
Also read - When Should I Purchase A Money Back Plan?
Understand The Working Of 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.