When it comes to financial planning, one of the most important decisions you can make is purchasing the best term insurance plan. However, with so many options available around us, it can be difficult to decide which policy is best for you. Term insurance plans with money back are a popular choice for those looking to protect their loved ones financially after their demise while also earning a return on their investment. But who should buy a money back policy? There are many aspects about the money back plan that no one talks about and this is what we are going to discuss in this article.
Who will benefit from a money back policy?
Young families: For young families, a money back policy can be an excellent choice. These policies can provide financial security to the family in case of an unexpected death, as well as the option to receive a lump sum at the end of the term. This can be especially beneficial for families who are still building their financial stability.
Retirees: Money back plan can also benefit retirees by providing an additional source of income during their golden years. The lump sum received at the end of the term can be used to supplement retirement income or to meet unexpected expenses. Furthermore, because term plans are typically less expensive than whole-life policies, retirees can reap the benefits of life insurance without spending a fortune.
Entrepreneurs: Entrepreneurs and business owners may also find money back plan to be an attractive option. Many entrepreneurs have irregular income streams, making it difficult to commit to a whole life insurance policy with fixed premiums. Term plans, on the other hand, have lower premiums and greater flexibility, making them a more appealing choice.
Single Parents: Single parents can also benefit from the best money back policy because it gives them peace of mind knowing that their children will be financially secure in the event of their death. The lump sum received at the end of the term can be used to fund their children’s education or other major expenses.
Do I get money back from money-back term insurance plans?
Yes, you will receive the entire premium amount paid for this policy when it matures.
The policyholder can select the structure of the policy payout. One option is to get a lump sum at the end of the policy term. Another option is to receive regular payouts at predetermined intervals according to the policy structure. Moreover, your payouts are determined by the plan’s duration and policy premiums.
The returns on money back life insurance plans are predetermined, and the policyholder receives the expected returns when the policy matures. It saves them from having to do meticulous payout calculations. Furthermore, they can plan how to use the funds once the plan matures.
Comparing Term Insurance and Money Back Policy
To compare moneyback policies and term insurance, potential investors should consider the following three factors:
Life insurance coverage: One of the most coveted benefits of having the best term insurance is that it provides a significantly higher sum assured for a low premium. To maximize your savings, purchase a term plan online as you will be able to find the best term insurance online due to the fact you will be able to compare different plans. A term plan provides significantly more coverage than a money back policy for the same premium.
This means that if the policyholder unfortunately passes away while the policy is still active, the term plan will pay the nominees a higher amount as the death benefit than a Money back policy.
Return on Investment: As previously stated, a term plan is a pure life insurance product that does not provide any return upon maturity. This means that if the policyholder survives the term, no amount of premium will be returned to them or their nominees. This is unless a person has chosen a term insurance with a return of premium policy, in which the premiums paid are returned to the insurance holder upon policy maturity. However, it is important to note that term insurance with the money back feature has significantly higher premiums than regular term insurance. Furthermore, the amount generates no interest. This is one of the primary reasons why some experts seem to suggest that instead of purchasing the best term insurance with a money back guarantee, consider a simple term plan and invest in other wealth-generating instruments. On the other hand, a money back policy has an investment component to it. In a moneyback policy, a certain percentage of the sum assured is paid out if the policyholder survives a specified term. Furthermore, the policyholder is eligible for certain bonuses that have accrued over the course of their moneyback policy. These cumulative bonuses collected over the course of the policy are returned at the time of the final instalment towards the moneyback policy. In the event of the policyholder’s death, the bonuses are transferred to the surviving beneficiaries. Moneyback policies have a higher return on investment than regular-term plans. The survival benefits of a moneyback policy can help an individual achieve short-term goals, such as funding a child’s higher education or planning a family vacation.
Tax Exemption: Both term insurance and moneyback policies are classified as insurance products, so they have equal tax-saving benefits. Both of these policies qualify for an exemption under Sections 80C and 10(10D) of the Indian Income Tax Act of 1961. Section 80C allows for an exemption of up to 1.5 lakh on the premiums of a term plan or money back policy. Section 10(10D) exempts the proceeds of insurance policies, whether they are death benefits, maturity benefits, or survival benefits, from taxation. An additional exemption of Rs. 25,000 under Section 80D is allowed for health insurance-based riders. So, if a policyholder adds riders like critical illness to their basic term plan, they are eligible for the Section 80D exemption.
So we are saying,
Both term and moneyback insurance have benefits and drawbacks. While term insurance with a return on premiums will return your investment, it won’t generate any profit over the course of the policy. On the other hand, a money back plan will provide the investor with timely payments; however, these payments will not be sufficient to fund long-term goals. Given these two considerations, it is prudent to invest in both term insurance and a moneyback policy to ensure both future and current financial security.
