Understand The Difference Between Money Back And Term Insurance Policy
Updated On Nov 30, 2021
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Before making any investments, financial gurus always advise thoroughly assessing your possibilities. Financial organizations have created diverse investment opportunities to satisfy diversified wants since monetary requirements vary from one person to the next. Term insurance is one of the most valuable solutions for securing the financial future of your loved ones, regardless of where you choose to spend your money. This is due to the fact that a term plan provides a large sum assured for a low premium. If one purchases a term plan online, the price is even lower.
However, because term insurance is a pure life insurance policy with no returns if the policy is not renewed at the end of the term, some customers prefer a money back policy. Insurance providers have tailored term insurance with a return on the premium to meet the expectations of insurance seekers. If the covered member lives to the end of the term, the premiums paid for term insurance are refunded. It's crucial to understand what each of these products guarantees before deciding between a money back policy and term insurance.
Term Life Insurance Plans vs. Money Back Plans
You must first grasp the differences between the two types of insurance policies in order to make an informed decision.
1. Extensive Coverage
Term life insurance is a type of policy that provides complete coverage at a low cost. In contrast, money back insurance coverage guarantees a reduced payout for the same price. A term plan will provide a lump sum payout to family members in the event of the insured's death, but a Money Back plan will pay the cash promised plus any earned bonus.
2. Return on Investment
If you survive the policy term of a term plan, the insurance company will not offer any survival benefits. The Money Back plan, on the other hand, pays out a certain proportion of the insured amount at predetermined intervals over the policy period.
3. Take Advantage of Taxing
Both insurance plans offer tax advantages. The Income Tax Act of 1961, Section 80C, exempts premium payments for term life insurance and Money Back Money Back plans from taxation. The maximum amount of tax relief is INR 1.5 lakh. There are no taxes on the maturity, death, or survivor benefits.
The money return plan provides benefits such as death benefits, maturity benefits, and survival benefits. Term insurance, on the other hand, pays out a lump sum in the case of a death. Maturity benefits are available in some term insurance contracts.
5. Beneficiary Payment Methods
The Money Back Policy provides for a lump-sum payment at regular times. Death benefits from term insurance might be paid in a flat sum or in monthly installments.
Money Back plans are commonly participation plans, which means that a bonus could be declared on the policy. Non-participating term insurance contracts have no incentives recorded on them.
Consider your co-objectives as well as your financial needs while deciding between the two. Term insurance is a type of protection insurance that does not have an investment component. It will provide financial stability for your loved ones if something horrible happens to you. However, you should choose a Money Back life insurance policy if you want to see a return on your investment. In addition to providing insurance, it also serves as an investment vehicle. Those who have already met their protection needs and have surplus income may be able to employ Money Back programs to attain their long-term financial objectives. Keep the investment's purpose in mind before making a selection.
You may also like to read - Know How To Compare Money Back Plans Online
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.