SHARE
Endowment and money back policies are two types of bundled life insurance plans that offer the dual benefits of savings and life insurance coverage. Furthermore, there are also additional tax benefits which come with these policies. While many people prefer these two bundled plans, there are a lot of ambiguities around their specifics, which can make the processes of choosing the right one for you a bit difficult. So to help you make an informed decision when it comes to purchasing the most apt plan for your needs, let’s have a look at the similarities and differences between endowment and money back policies.
What is an endowment policy?
An endowment policy is a life insurance plan which provides life insurance coverage for the policyholder and allows them to save regularly over a policy’s tenure. In the event that the policyholder survives the term of the contract, they will get a lump sum amount at the time of maturity.
What is a money back policy?
In a money back policy, you will get a percentage of sum assured at regular intervals, as staggered returns, instead of getting the lump sum amount at the time of maturity; if the policy holder survives the term. In that case, it is like an endowment plan but comes with the benefit of periodic and specific payouts.
Comparing endowment and money back policy
Endowment and money back policies have some similarities and significant differences. These are the ones that you should keep in mind.
| Endowment policy | Money back policy | |
| Term and maturity benefit
|
The sum assured and applicable bonuses are paid to the policyholder at the time of maturity if he/she survives the term. There are no payments made during the term of the plan.
|
The policyholder will get a percentage of sum assured at predetermined intervals, during the duration of the plan. Upon maturity, the balance sum assured and applicable bonuses are paid to the policyholder if he/she survives the term .
|
| Death benefit
|
Both endowment and money back policy will pay the sum assured and applicable bonuses, if the policyholder dies during the tenure of the contract.In a MB policy, on death, irrespective of the instalments paid out already, the full sum assured is paid. This makes MB plans costlier.
|
|
| Normal tenure
|
Endowment policies generally have a tenure of between 10 to 25 years.
|
Money back policies mostly come with a tenure of 20 to 25 years.
|
| Risk and premium
|
The risk associated with both plans is low, given the survival/maturity benefit. However, for the same reasons, premiums in endowment and money back policies are higher than other term policies.
|
|
| Loan facility
|
Since the sum assured is paid as a lump sum only at the time of maturity, an endowment policy can be used as a security to obtain a loan.
|
As a portion of the sum assured is constantly deducted during the term of the policy, a loan cannot be taken out against a money back plan.
|
| Suitability | An endowment policy is most suitable for people who are looking to accumulate savings towards achieving their long term financial goals like buying a house, financing children’s higher education or marriage, retirement and so on. | A money back policy is apt for people who will require regular flow of income to meet short term financial goals like EMIs, children’s school fees, household expenses like rent or other bills, etc. |
Now that you know how an endowment and money back policy differ, you can make a better decision when it comes to choosing the right one for yourself. At the same time, for Insurance policies, don’t forget to compare prices across companies and get your financial advisor’s opinion before purchasing a policy.
Start your personal wealth journey with us today!
Plan to Maximize Your Retirement Years
October 4, 2018
0 Comments
Leave a Reply
- 2019
- 2020
- Awards
- Banking
- Budget
- Cashflow Management
- CORPORATE
- Corporate Wellness
- Couple
- Cross Border Financial Planning
- Dreams
- FAQ
- FINANCE
- Financial Goal
- Financial Planning
- FINANCIAL TRANSITIONS
- FINANCIAL WELLNESS
- Goals
- Holidaying
- Housing
- Insurance
- Investment
- Market
- Money
- Mutual Funds
- NRI
- Portfolio
- Real Estate
- Retirement
- Risk Management
- Rupee
- Succession Plan
- Tax Planning
- Tax Return
- Technology
- Wealth Management
- Women
Categories
Endowment and money back policies are two types of bundled life insurance plans that offer the dual benefits of savings and life insurance coverage. Furthermore, there are also additional tax benefits which come with these policies. While many people prefer these two bundled plans, there are a lot of ambiguities around their specifics, which can make the processes of choosing the right one for you a bit difficult. So to help you make an informed decision when it comes to purchasing the most apt plan for your needs, let’s have a look at the similarities and differences between endowment and money back policies.
What is an endowment policy?
An endowment policy is a life insurance plan which provides life insurance coverage for the policyholder and allows them to save regularly over a policy’s tenure. In the event that the policyholder survives the term of the contract, they will get a lump sum amount at the time of maturity.
What is a money back policy?
In a money back policy, you will get a percentage of sum assured at regular intervals, as staggered returns, instead of getting the lump sum amount at the time of maturity; if the policy holder survives the term. In that case, it is like an endowment plan but comes with the benefit of periodic and specific payouts.
Comparing endowment and money back policy
Endowment and money back policies have some similarities and significant differences. These are the ones that you should keep in mind.
| Endowment policy | Money back policy | |
| Term and maturity benefit
|
The sum assured and applicable bonuses are paid to the policyholder at the time of maturity if he/she survives the term. There are no payments made during the term of the plan.
|
The policyholder will get a percentage of sum assured at predetermined intervals, during the duration of the plan. Upon maturity, the balance sum assured and applicable bonuses are paid to the policyholder if he/she survives the term .
|
| Death benefit
|
Both endowment and money back policy will pay the sum assured and applicable bonuses, if the policyholder dies during the tenure of the contract.In a MB policy, on death, irrespective of the instalments paid out already, the full sum assured is paid. This makes MB plans costlier.
|
|
| Normal tenure
|
Endowment policies generally have a tenure of between 10 to 25 years.
|
Money back policies mostly come with a tenure of 20 to 25 years.
|
| Risk and premium
|
The risk associated with both plans is low, given the survival/maturity benefit. However, for the same reasons, premiums in endowment and money back policies are higher than other term policies.
|
|
| Loan facility
|
Since the sum assured is paid as a lump sum only at the time of maturity, an endowment policy can be used as a security to obtain a loan.
|
As a portion of the sum assured is constantly deducted during the term of the policy, a loan cannot be taken out against a money back plan.
|
| Suitability | An endowment policy is most suitable for people who are looking to accumulate savings towards achieving their long term financial goals like buying a house, financing children’s higher education or marriage, retirement and so on. | A money back policy is apt for people who will require regular flow of income to meet short term financial goals like EMIs, children’s school fees, household expenses like rent or other bills, etc. |
Now that you know how an endowment and money back policy differ, you can make a better decision when it comes to choosing the right one for yourself. At the same time, for Insurance policies, don’t forget to compare prices across companies and get your financial advisor’s opinion before purchasing a policy.
Start your personal wealth journey with us today!
0 Comments
0 Comments