Endowment Vs Money-Back Policy – What Should You Buy?

Both money-back policies and endowment plans are bundled life insurance policies offering twin life coverage and savings benefits. Moreover, both these plans qualify for tax deductions.

But, a primary difference between an endowment policy and a money-back plan is their maturity benefits. The following sections will detail the difference between these policies, which will help individuals make an informed choice.

About an endowment policy

An endowment policy provides a lump sum amount on the maturity of the policy or the death of the insured. It might be an ideal option for individuals who are looking for long term investment options.

In addition, endowment policies feature a high premium amount yet pay a high sum assured at the end of the policy term.

About money-back insurance plan

A money-back insurance plan specifically pays a percentage of the sum assured to the insured at regular intervals. Unlike endowment plans, money-back policies do not provide a lump sum amount in the event of death or maturity.

That said, this policy might be an ideal choice for individuals who want to meet their short term financial goals and seek regular income.

Differences between an endowment plan and money back policy

Besides understanding the endowment policy meaning and money-back plan, one must know their differences.

Here are a few points of distinctions between these two policies:

1. Maturity benefits

In an endowment plan, the policyholder gets the sum assured and suitable rewards at the time of policy maturity. If a policyholder dies before the policy’s maturity, the insurer pays the sum assured to his/her nominees.

Meanwhile, in a money-back policy, a policyholder receives a specific percentage of the amount from the total sum assured at regular intervals, as stated in the policy terms. In addition to this, he/she receives the remaining corpus upon maturity. Moreover, if a policyholder dies during the policy period, his/her nominees get the sum assured and applicable bonuses.

2. Policy tenor

Typically, the policy tenor for a money-back plan ranges between 5 and 25 years for most insurance companies. Meanwhile, an endowment policy’s tenor may vary between 10 and 35 years, depending upon the insurance company.

3. Loan facility

A policyholder cannot get a mortgage loan with money back plan. This is because the sum assured amount constantly decreases due to the regular pay outs.
However, when it comes to endowment policies, policyholders get the benefit of financial protection, long term savings and an option to obtain a loan against this plan in case of a financial emergency.

Benefits of a money-back plan

A money-back plan brings a host of benefits, such as –

1. If a policyholder dies, the nominees receive the entire sum assured. His/her family can utilise this money to meet a variety of financial obligations.

2. If a policyholder outlives the policy term, he/he gets the remaining corpus in addition to all bonuses or rewards.

3. It satisfies all short term investment objectives of individuals.

4. It provides a guaranteed corpus and is ideal for individuals who have a low-risk appetite.

Benefits of an endowment policy

Mentioned below are a few benefits of endowment policies:

1. Individuals get an option to obtain a loan against this insurance policy in times of emergency financial needs.

2. If the insured person dies, the insurer pays the entire sum to his/her nominees.

3. Endowment policies work by gathering a substantial amount of funds over a period. Such an investment option provides investors financial security at no risk by presenting a lump sum corpus at the tenor end.

4. This policy offers a disciplined money-saving method for long term financial goals.

To compare the terms and conditions of both these plans, one can visit aggregators and conduct thorough research before making a decision.

Evidently, both an endowment policy and money-back plan have their own set of features. Individuals must assess their financial needs before choosing between the two.