Finance

Term Life Insurance vs Money Back Life Insurance

Protecting your family is of utmost importance. Providing for your family when you are healthy, and when your income is stable could be easy. But what if something unfortunate is to happen and you have to leave your loved ones behind?

A life insurance could prove to be precious here. It can provide for your family even in your absence and help keep your family financially stable.

At the same time, many people could have inhibitions about life insurance, especially term life insurance, as the money you pay as premium will be void at maturity. Money back life insurance policies could be an answer for such people.

Let’s first understand what a term insurance and a money back life insurance is.

What is a term plan?

A term life insurance is a form of life insurance where a person can insure themselves for a certain amount of money (sum-insured), for a certain period of time. The beneficiary can claim the sum insured if the insured passes away during the course of the insurance.

In a term plan, the premium amount depends on the sum insured, your age, and your health condition. While there are riders you can add to get back a percentage of the amount when an unclaimed plan matures, usually, the money you paid as premiums will not be paid back.

What is a money back insurance plan?

Money back insurance plans work like a term life insurance. You can insure yourself with a sum-insured, which can be claimed by the beneficiary in case if you have to leave them behind.

The main difference here is that money back insurance plan is a savings scheme as well.

Unlike in a term plan, you invest an amount of money that will be equal to the sum insured. For example, if you invest Rs.1 lakh, in most cases, your sum insured will be Rs.1 lakh as well.

Here, the insurance company will pay you back a percentage of this insured money in certain intervals. If you survive the whole term, you will receive the rest of your money insured, plus a bonus amount.

But in case you don’t survive the complete insurance term, your beneficiary will get the whole insured sum without deduction of the payments that you have received before.

Example of a money back insurance plan

Let’s take an example so that the idea is clearer for you.

Navya took a money back insurance plan for Rs.10 lakh for 30 years.

In the plan, Navya will receive regular payments of Rs.2 lakh every five years from the 10th year. That means, if Navya survives the whole term period, she will receive Rs.8 lakh before the maturity and at maturity, she will receive the rest of the amount with a bonus amount, which is a percentage of the sum-insured.

Suppose if Navya, unfortunately, passes away in the 26th year of the plan, she would have received Rs.8 lakh till then in pay-outs, but still, her beneficiary will receive the whole sum insured amount of Rs.10 lakh.

Term insurance benefits vs Money back insurance benefits

Let’s look at benefits each carry, which will help you in choosing what suits you.

  • Affordability is the biggest difference between them both. Term life insurance requires you to pay only a very nominal amount but in the case of money back insurance, an amount closer to the insured sum must be paid in total.
  • Term life insurance usually carries a higher insured sum due to the same reason. For a 25-year person, a monthly cost of Rs.575 or more will be enough for a coverage of Rs. 1 crore till the age of 70, on an average.
  • Money back life insurance is a savings opportunity as well, while term life insurance is a pure insurance policy.

 

How to choose between a term Insurance and a money back life insurance?

Research is the key in choosing between these. You can make use of plenty of resources available online to weigh term insurance benefits over money back insurance benefits and choose one.

You could also visit an insurance provider website that will have tools to help you find out the information to buy term insurance or a money back life insurance.

Visit your insurance provider and get insured today!