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Difference Between Endowment Plans and Money Back Policies

dateKnowledge Centre Team dateJuly 07, 2021 views117 Views
Endowment Plans Vs Money Back Plans | Buy the Best Life Insurance

Endowment plans and money back plans are two distinct kinds of bundled life insurance policies that consist of twin advantages of life insurance and savings coverage. Moreover, there are further supplementary tax advantages that come with these plans.

When you contemplate buying a life insurance policy for the first time, these two options are the most fundamental ones that cross your mind. Various similarities between these two products make the selection process difficult. Many people get perplexed when deciding on which one to choose from, endowment plan vs. money back plan.

What is an Endowment Plan?

An endowment plan is essentially a life insurance policy that presents life insurance coverage to the insured person and enables them to save funds periodically over the policy's tenure. When the person insured outlives the Term of the policy, the insured person will receive an accumulated amount at the time of maturity.



What is a Money Back Plan?

In a money-back plan, the policyholder will receive a portion of the amount assured at frequent periods, as a tremendous return on investments, rather than receiving the lump sum at the maturity period. If the insured person survives the policy term, then, in that case, it becomes similar to an endowment policy but arrives with the advantage of recurrent and explicit payouts.

Difference between Endowment and Money Back Plan

While both endowment plans and money-back policy fulfill the purpose of a whole life insurance plan, there is some difference between money-back policy and endowment policy.

Hence, to assist you in making an informed decision between endowment vs. money back plan, here are some important points of distinction between the two.

1. Term and maturity benefit

In an endowment plan, the amount guaranteed and suitable rewards are paid to the insured person at the time of maturity if they outlive the policy term. There are no provisions for making payment during the endowment plan.

On the other hand, the insured person under a money-back policy will receive a portion of the sum assured at the pre-decided periods during the policy term. In addition to this, the insured person will receive the remaining sum assured upon maturity if the policyholder outlives the policy term.

2. Mortality benefits

The endowment policy and the money-back plan will give the amount guaranteed and appropriate bonuses if the insured person departs during the policy's tenure. However, in a money-back plan, in case of the policyholder's death, the entire sum assured is paid to the dependents of the insured person, irrespective of the premium installments paid.

This is the special feature that differs between an endowment and a money-back plan, and this is what makes a money-back plan a bit more expensive.

3. Suitability

An endowment plan is most beneficial for individuals looking to save funds for attaining all their long-term economic goals like purchasing a house, funding their kid's higher education fees or for retirement.

On the contrary, a money-back policy is suitable for individuals who will need a steady revenue stream to fulfill all their short-term economic goals like paying EMIs, household expenses, children's school fees, and many more.

4. Risk

The risk associated with endowment plans is relatively low as compared to that of a money-back policy. Also, the survival and mortality advantages are higher in an endowment plan and that too at a lower premium installment.

Advantages of Buying an Endowment Plan

a. If the insured person outlives the policy term, the amount assured and the rewards (if any) will be paid to the insured person at the end of the policy term.

b. In the event of the insured person's demise, the amount assured and the additional rewards are given instantly.

c. Endowment policies usually operate by amassing funds over an extended period. The sum invested in the form of an endowment plan will cover all the financial risk that you face in life and present you with a lump sum amount at the end of the policy term.

Learn everything about an endowment plan.

Advantages of Buying a Money Back Plan

a. The insured person under the money-back plan will receive a set portion of the sum ensured at periodic intervals. In addition to this, the remaining sum will also be paid along with interest to the insured person when the policy term expires.
b. If the insured person departs during the money-back policy term, the total amount assured will be given to the beneficiary or nominee of the policyholder along with all the applicable interest and bonuses.
c. The money-back plan is perfect for satisfying all your set short-term financial purposes so that you and your loved ones always remain guarded against all sorts of unforeseen financial risks.

Endowment Plan vs. Money Back Plan: The Final Verdict

After all the points on money back vs. endowment plan, you must have understood that both endowment plans and money-back policies come with their own set of advantages and disadvantages. However, according to various modern-day investors, an endowment policy is considered slightly better than a money-back policy.

You may buy Invest 4G plan, which is one of the most comprehensive endowment plans offered by Canara HSBC Oriental Bank of Commerce. Choose this plan and safeguard your family against all unforeseen financial risks.

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Frequently Asked Questions

What is saving plan?

A savings plan is likely to be different for everyone depending on the financial goal, risk profile, returns, and investment horizon. If you are young and want to save for your retirement, ULIPs like Invest 4G or Titanium Plus plan would be the best option. You are likely to create a large corpus by your retirement through market-linked returns if you invest in this savings plan. If capital protection is your aim, then traditional insurance plans such as Guaranteed Money Saving Plan should be suitable for you.

Who should invest in a Savings Plan?

If you are looking for a guaranteed income plan, then saving plans should be on your list of investments that you are planning to make. Savings plan require you to invest a pre-decided amount on a regular basis. People with a regular stream of income who require a lump-sum amount after a period should opt for a savings plan. Working professionals, self-employed people and businessmen should consider a savings plan to meet their long-term financial obligations. Saving plans are also ideal for people who are risk-averse and want to accumulate funds through relatively safer mediums. These saving plans inculcate financial discipline in policyholders which make them crucial for every portfolio.

How much money should you put in savings each month?

The amount that should be invested in a savings plan each month depends on the income, existing financial obligations and the long-term financial goal. If you have a steady income, you should save at least 20% of your monthly income. It is not necessary to invest your entire money into a savings scheme as investments should be diversified. Ideally, you should aim to have a financial buffer of over 10 times of your annual income. Choose an income plan based on your financial circumstances to stay afloat.

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What is the difference between saving and investing?

Saving is the money that you keep aside for emergencies or for buying any big-ticket item. Investing means growing or multiplying the wealth that you have by buying savings plan, or any other assets. Buying a savings plan will help you in achieving your investment goals such as retirement, your child’s higher education or marriage, or for buying a new house.

Which savings plan is best for retirement?

The Invest 4G plan with its multiple investment options and various portfolio management strategies for capital protection is an ideal saving plan for retirement. Also, Guaranteed Income4Life is also another savings plan that you can consider for building your retirement corpus as it acts as a guaranteed income plan that will provide you maturity benefits to manage your post-retirement expenses.

Which savings plan is best for long-term goals?

Smart Goals Plan is a savings plan with its unique features such as modification of the sum assured partial withdrawal and fund switch can help you plan for your long-term financial goals. Canara HSBC Oriental Bank of Commerce Life Insurance offers a wide variety of saving plans that you can invest in as per your risk appetite and investment goal.

Which savings plan is suitable for girl child?

The Future Smart unit-linked plan from Canara HSBC Oriental Bank of Commerce Life Insurance is the ideal savings plan for the girl child. Monthly Income Advantage Plans are also a good option if you are planning to invest in a savings plan for your girl child.

Where should I invest my money?

You should spread your investments across financial instruments. However, having the best savings cum guaranteed income plan in your portfolio is extremely important. Savings plan ensures financial stability and also helps in fulfilling short, medium and long-term monetary goals.

What is a monthly income advantage plan?

A monthly income advantage plan ensures that you lead a stress-free life with your loved ones as it provides a life cover along with giving you guaranteed monthly income. In short, it is a life insurance and income plan that will financially secure commitments made to your loved ones. Canara HSBC Oriental Bank of Commerce Life Insurance Guaranteed Income Advantage Plan is a monthly income advantage plan that provides life cover for the entire term while you pay premium only for a limited period.

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What is a good age to start saving money?

When you plan to invest in a financial product, it always pays well to start early. The earlier you start saving and investing, the better. When you start investing early, the capital gets adequate time multiply. Even a small amount invested for a long time can give substantial returns due to compounding in a savings plan. Invest in an income plan as early as possible to build a significant corpus that will later help you in life. Ensure that you buy the best saving plan in India that can be aligned with your investment goals.

Should you use a savings plan for retirement planning?

Yes. Retirement planning is one of the most important financial decisions of our lives. The best saving plan offers a host of features that may help you build your retirement corpus. Some of the saving plans like Guaranteed Income4Life offer guaranteed returns at policy maturity. Such returns can act as a regular income stream even after your retirement to help you stay financially stable.

Are saving plans beneficial for managing unexpected expenses?

Yes. Best saving plans in India offer partial withdrawal system that can be utilized during your rainy days. Being financially prepared to tackle such odds will help you manage any unforeseen expenses in a smooth manner. Buy a monthly income advantage plan that will generate a steady source of income for you to take care of both long-term and short-term financial goals.

How to save tax by using savings plan?

Saving plans are known for helping us achieve our financial goals. Best saving plans allow you to grow your wealth while providing life cover. Saving and investment plans are also beneficial for tax planning. Premiums of savings cum protection plans come with tax benefit under Section 80C of the Income Tax Act. Moreover, proceeds received upon the death of the policyholder or upon the maturity of the policy are tax free under Section 10 10(D).

What is the right age to start saving money?

When you plan to invest in an income plan, it always pays well to start early. The earlier you start investing in a savings plan, the better. When you start investing early, the appreciation in capital is significant. Even a small amount invested in the best saving scheme for a long time can give substantial returns due to compounding. Buy the best savings plan as soon as you start earning to achieve all your milestones on time.

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How a savings plan can help in building your child’s education fund?

Saving plans help in building wealth over time against the investments that you make. Buy the best savings plan to build an education fund for your child. The best saving plan for kids offered by Canara HSBC Oriental Bank of Commerce Life Insurance eases the stress of planning your child's future by providing a lump-sum payout on the investment. Consider investing in a monthly income advantage plan to assist you in fulfilling your financial goals.

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How Savings Plans by Canara HSBC Oriental Bank of Commerce Life Insurance can help you?

Every person has a unique reason to save and invest. With ULIP savings schemes, the company caters to people seeking wealth creation through capital appreciation. Contrarily, the traditional plans can help you save for important life goals without worrying about the fluctuation in fund value. All major savings plan offers partial withdrawal facility that can help you take care of unplanned contingencies. With savings plans from Canara HSBC Oriental Bank of Commerce Life Insurance, you get adequate flexibility while investing and receiving the savings benefits, which makes them a good investment choice for investors looking for income plans.

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