When an individual decides to buy a policy, he/she prefers to choose a plan that offers both savings and life coverage. Although there are various plans that can offer you insurance-cum-investment benefits, we shall compare endowment and money-back policies in this article so that you can make a wise decision about which one will suit you better.
What Is An Endowment Plan?
An endowment plan is a type of life insurance plan that is specifically designed to provide to provide a lump sum payment on the policy’s maturity or in the case of death of the policyholder. An endowment plan might be chosen by people who are making preparations for future events like retirement or the marriage of their children.
Moreover, if you are an investor looking for long-term investing choices, it is a perfect plan for you. Although it has a hefty premium, it also gives you a respectable sum assured near the end of the policy’s term.
Benefits Of Endowment Plan
Below are some of the benefits of an endowment policy:
- High Liquidity: As compared to other investment options, endowment plans have a higher liquidity level.
- Increased Returns: The earnings on an endowment plan are frequently larger because they are compounded over the course of the policy.
- More Flexibility In Premiums: Endowment plans demand short-term premium payments in exchange for ongoing advantages. This suggests that there are numerous ways to pay for premiums.
- Lower Risk: The investment also carries a low risk.
- Loan Option: One key advantage of the endowment plan is the option to borrow against the policy as and when necessary. You won’t need to provide any form of collateral while applying for the loan.
What Is A Money Back Policy?
A money-back policy is a specific type of life insurance plan created to pay out a portion (percentage) of the sum assured on a regular basis. Money-back insurance does not offer a lump sum payment in the case of death or maturity, in contrast to endowment plans.
Consider purchasing a money-back insurance plan if you want to protect your life and your investments in such a way that you receive payments periodically. It is a useful plan for making short-term investments.
Benefits Of Money Back Policy
A money-back plan has a wide range of benefits. For this reason, investors of all ages and economic levels continue to favor them as the top insurance products. Here are some benefits of a money-back plan for you:
- Regular Source Of Income: Money-back plans serve as a consistent source of revenue. In contrast to a standard life insurance plan, these plans offer a continual source of money at predetermined periods in addition to maturity benefits.
- Additional Bonuses: Every year, a new bonus is added to the money-back plan as a revisionary bonus. Eventually, this bonus will be paid out upon maturity. As a reward for continuing to invest in the plan, insurers also offer a final bonus at the conclusion of the period.
- Offers Insurance Cover: A money-back plan is also an insurance tool, despite the fact that it is thought of as an efficient investment product. You might pick a cover that can be used to provide for the financial needs of your loved ones.
- Low-Profile Risk: The market’s swings have an impact on other investment products including mutual funds, stocks, bonds, shares, etc. However, you receive guaranteed returns on a regular basis with a money-back plan.
Basic Differences Between Endowment & Money Back Policy
One must also understand the distinctions between the money-back plan and an endowment policy in addition to their meanings.
The following are the 3 key differences between these two policies:
|When the policy reaches its maturity date under an endowment plan, the policyholder receives the sum insured and any appropriate awards. In case the policyholder passes away prior to the policy’s maturity, the insurer pays the promised sum to the named beneficiaries.
|In a money-back policy, the terms and conditions of the contract specify how often the policyholder will get a certain proportion of the total sum assured. Additionally, upon maturity, he or she obtains the leftover corpus. A policyholder’s nominees also receive the sum insured and any relevant bonuses if they pass away during the policy period.
|The endowment plan ranges from 5 to 10 years.
|Money-back policy ranges from 10 to 35 years.
|This plan may be used as collateral for a loan.
|Due to the ongoing reduction of the sum assured, this plan is not susceptible to any kind of mortgage.
|An endowment plan is most advantageous for people trying to save money for all of their long-term financial objectives, such as buying a house, paying for their children’s higher education costs, or for retirement.
|A money-back policy is appropriate for people who require a consistent income stream to achieve all of their short-term financial objectives, such as paying EMIs, home bills, children’s school fees, and many other things.
Making The Decision
Evidently, each type of policy – a money-back plan and an endowment policy – has its own set of characteristics. Before deciding between the two, people must evaluate their financial needs.
One can go to aggregators and do extensive research to examine the terms and conditions of both of these plans before making a choice. We hope the information above will assist you in choosing between an endowment plan and a money-back plan.