Term Life Insurance Vs Money Back Insurance

Both term insurance and money-back policies are popular insurance plans provided by insurance companies. Each of them comes with their own unique features and benefits. 

While a term insurance policy is meant purely for the financial protection of your dependents in your absence, a money-back plan offers a combination of coverage and investment option. If you are confused while selecting one among term insurance vs. money back policy, then recognising the difference in their features and benefits can be helpful. So, in order to know about both policies in detail, keep reading.

Term insurance is a life insurance plan that provides coverage to a policyholder for a pre-decided number of years called policy ‘term’. The policyholder determines the assured sum as well as the term at the time of buying a policy. In the event of any unfortunate incident during this term, the nominee will be compensated with the entire sum assured mentioned in your policy.

Apart from providing financial protection to your dependents in times of crisis, one great advantage of buying term insurance is its affordable premium amount.

As per its name, a money back insurance policy is an endowment plan that enables an individual to get back some amount at fixed intervals called survival benefit. In this type of insurance policy, the insurance company provides a certain portion of money to the insured individual instead of compensating a large sum at the end of the policy term.

In case anything unfortunate happens to the insured person before the maturity of the policy, that person’s nominee is entitled to get the assured sum, regardless of the survival benefits offered previously. A money back insurance policy enables a person to retain proper liquidity and, at the same time, build their savings.

Following are the important benefits of term life insurance plans:

• Variety: Term insurance comes with a range of insurance plans comprising level term, term insurance with return of premium plan, increasing and decreasing term plan. The level term life insurance policy provides death benefits at an affordable rate of premium, while return of premium plan offers financial security added with survival benefits. 
• Premium Refund: Another notable benefit of a term life insurance plan is that it helps get the invested premium back. This enables an individual to get a substantial refund of the sum and concurrently use it to meet any financial need or investment purpose. 
• Rider Benefits: With the additional charges, you can add some riders to your plan to get advantages. Riders refer to the add-ons on your present term life insurance policy that provides additional protection and coverage against risks. In this way, it ensures financial protection for one’s family and dependents. 
• Tax Benefits: According to section 80C, policyholders are entitled to get tax benefits for the premium payments of term insurance plans. In addition, it enables you to save taxes by reducing your taxable income by ₹1.5 Lakhs. 
• Flexibility: Among the most important benefits of a term life insurance plan is its duration of coverage and flexibility. Having convertible insurance plans, you can switch to other plans whenever you need. Moreover, this policy provides you with the scope to boost your savings more effectively.
• Minimum Premiums: Term insurance plans are highly popular owing to their affordable premium rates. As term insurance plans do not require you to take a large financial burden while offering reasonable premium rates. This makes it affordable to every class of society.  
• No Hidden Charges: In a term life insurance policy, there are no hidden charges that the insurance buyer should worry about. Therefore, while opting for this insurance policy, you can plan your budget accordingly with an assurance that there will be neither hidden charges nor surprising increase in the premium amount.

You can opt for term insurance to secure the financial future of your dependents in case of any unfortunate scenario. However, it does not provide any survival benefit and is available at a nominal premium. On the contrary, a money back plan provides you with life coverage for a particular term. In addition, it offers financial returns at fixed intervals, which helps in wealth building. However, its premium is relatively higher.

So, if you intend to ensure your family's financial security at an affordable premium rate, term insurance will be the best choice for you. Conversely, if your objective is to have coverage for enjoying survival benefits in addition to the accumulation of funds, then money back is matchless.

So, now that the concept of term insurance vs. money back insurance policy is clear, you can easily make a choice between them while buying the policy. However, both of them have different rules and guidelines which you must remember to follow. Also, while opting for these policies, do not forget to go through the features and benefits discussed above.