Term Plan vs Money Back Policy: Which is a better option?
Choosing between a term plan and a money back policy can be difficult as they both offer appealing benefits. However, the decision should be based on the specific needs of the insurance buyer.
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Picking a life insurance policy isn't simple and one needs to consider various factors before enrolling into one. One of the most important aspects for choosing an insurance policy is to see the insurance coverage and specific needs of the buyer. While purchasing a life insurance policy it could be confusing for many to choose between a term plan and a money back policy.
It could be a little tricky to decide between the two as both types of plans offer different sets of benefits. Making a decision generally depends on the financial goals of a person and insurance protection needed.
Here’s a comparison between a term insurance plan and a money back policy.
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What is a term plan?
A term plan refers to a life insurance policy that offers only protection. Under this policy, the life insured pays a fixed premium monthly or annually and gets insurance coverage for the policy period. The term insurance plan period may range from 10 years to 30 years. The primary advantage of choosing such a policy is its affordability and high coverage. The premium amount is also comparatively lower than other policies. The term insurance policy is pure protection plan and does not offer any survival benefit.
So, choosing a term plan could be the best decision if you aim to ensure that your family is financially secure in case of an unforeseen incident.
What is a money back policy?
A money back policy is very different from a term plan as it offers both insurance and savings. This policy ensures that a set amount is transferred to the life insured at periodic intervals throughout the policy term. This feature could lure you into choosing the policy if you're looking for a reliable source of income at different stages in your life.
Money back policies can prove to be beneficial as they assist in achieving several financial milestones. For instance, it can facilitate you to cover education expenses for your children or could help you pay for the expenditures made during other important events. Additionally, they offer a maturity benefit wherein you get the remaining amount of the sum assured along with bonuses accrued during the policy term, if any.
However, due to the periodic payouts the premium is on the higher side compared to the term plan. Also, the insurance cover they provide is much lower than the term plan.
How to make the final decision?
Well, the final decision depends on your needs. If you want maximum coverage and prefer long-term protection then go for a term plan. On the other hand, if you want to meet specific financial goals, don't want to consider higher risks and want to benefit in the short term, opt for a money back policy.
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