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Money Back Or Term Life Policy? Which One To Choose?

Term insurance protects your family in the event of a catastrophic event occurring during the policy's term. You can purchase the plan for a small monthly premium, and the sum assured will be paid to your family. The policy is intended to cover the possibility of death. You will not receive any maturity benefits if you outlive the policy's term. A money-back life insurance policy is an endowment policy that provides you with life insurance for a set period of time. Throughout the policy term, you will receive returns at regular intervals. These benefits are referred to as survival benefits. If something happens to you before you reach maturity, your nominee will receive the sum assured, regardless of the survival benefits you received previously.

Money Back Or Term Life Policy? Which One To Choose?

Money-Back Life Insurance vs. Term Life Insurance

To make an informed decision, you must first understand the differences between the two types of insurance plans.

Coverage

The term plan is a type of life insurance that offers high coverage for a low premium. A moneyback insurance policy, on the other hand, has a lower sum assured for the same premium amount. A term plan will pay a lump sum to ensure the financial security of the insured's family members in the event of the insured's death, whereas a moneyback plan will pay the sum assured plus any accrued bonus.

Investment Returns

If you survive the policy term, the insurance company will not provide any survival benefits. The moneyback plan, on the other hand, will return a certain percentage of the sum assured at predetermined intervals during the policy term.

Benefit from Taxes

Both insurance plans provide tax advantages. Section 80C of the Income Tax Act of 1961 exempts premiums paid for term life insurance and Money Back plans from taxation. The maximum amount of exemption is INR 1.5 lakh. Maturity benefits, death benefits, and survival benefits are all tax-free.

Advantages

Death benefits, maturity benefits, and survival benefits are all included in the money return plan. Term insurance, on the other hand, provides a lump-sum payment in the event of death. Some term insurance contracts include maturity benefits.

Methods of Beneficiary Payment

The Money Back Policy stipulates that a lump-sum payment be made at regular intervals. Term insurance death benefits can be paid in one lump sum or in monthly installments.

Bonus 

Money-Back plans are frequently participation plans, meaning that a bonus could be declared on the policy. There are no incentives recorded on non-participating term insurance contracts.

Conclusion

When deciding between the two, keep your personal goals and financial needs in mind. There is no investment component to a term insurance plan. It is a protection plan. It will provide financial security to your loved ones in the event that something bad happens to you. If you want to get a return on your investment, a Money Back life insurance policy is the way to go. In addition to providing insurance coverage, it also serves as an investment plan.

You may also like: Top 3 Money Back Plans To Buy In 2022

Money Back Policy Vs. SIPs - Which Is Better?

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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