Coverfox.com
  • Insurance
    • Car
      • Car Insurance
      • Companies
      • Third party car insurance
      • Comprehensive car insurance
      • Car insurance calculator
      • New car insurance
      • Zero Dep Car Insurance
      • Buy Car Insurance
      • Compare Car Insurance
    • Bike
      • Two Wheeler Insurance
      • Two Wheeler Insurance Companies
      • Two Wheeler Insurance Claim
      • Two Wheeler premium Calculator
      • Third party Bike insurance
      • Multiyear Bike Insurance
    • Health
      • Health Insurance
      • Companies
      • Mediclaim Policy
      • Individual Health Insurance plans
      • Critical illness insurance
      • Senior citizen health insurance
      • Arogya sanjeevani policy
      • Coronavirus Health insurance
    • Term
      • Term Insurance
      • Companies
      • Life insurance
      • Life Insurance calculator
      • Term Insurance calculator
      • Life Insurance Plans
      • 1 crore term insurance
      • Compare Term Insurance
      • Buy Term Insurance
      • Term Insurance Renewals
    • Investment
      • Investment Plans
      • Companies
      • Buy Investment Plans
      • Child Plans
      • Pension Plans
      • ULIP
      • Endowment Policy
      • Tax saving investment
      • Buy ULIP
      • Best ULIP
  • About Coverfox
    • About us
    • Insurance Blog
  • Claims
  • Contact us
  • Login
image title
TERM INSURANCE

Term Life Insurance v/s Money Back Life Insurance

Rohit Sapra Rohit Sapra 15 March 2018

In the tug-of-war between best protection and regular payouts with protection, there is no clear winner as each has its own benefits and drawbacks. Today let’s try to find out what is best for you and how!

Term life insurance vs money back life insurance

“Aam Ke Aam aur Guthliyon Ke Daam”, is the best way of describing the mindset of an average Indian. We Indians are best known for extracting out everything we use until the very end, and then some more. This stays true for many things, be it daily use articles or other instruments including protection.

We want our protection plans to perform its primary responsibility of providing for our family in the absence of their sole breadwinner. In case you survive the term of the protection plan, we want our investment back and in turn, if we get something over and above that, our joy and happiness knows no bounds.

Distributors and Agents of Life Insurance companies operating in India have correctly got hold of this tendency and have been actively manipulating it for pushing life insurance products with savings and investment components, particularly they insist on adding money back insurance plan to their customer’s portfolio. People think they have made a smart choice and are quite sure about their decision of buying a money back plan as the optimal FREE Life Insurance Plan. This mindset makes term plans less popular, especially, among the middle-class people as nothing is paid back in the end as a maturity benefit. So, before we begin the tug-of-war to find out what is best for you and how, let’s meet the challenges without any further ado:

In the red corner, we have,

Term Life Insurance

  • A pure protection life insurance plan with very high sum assured for a nominal premium
  • Entire sum assured is paid to the nominees on the death of the life assured
  • In case the life insured survives the defined term of the policy nothing is paid back

In simpler terms, a term life insurance plan is your perfect companion that looks after your family in case something happens to you. It helps your family by taking over your financial responsibilities. It supports your family members to maintain the standard of living even in the absence of the sole breadwinner.

In the blue corner, we have,

Money Back Life Insurance Plan

  • A variant of endowment plan with life cover for the defined term of the policy.

  • On surviving the defined period of intervals, the insured person gets back a particular percentage of his sum assured as survival benefit payout or in simpler terms Money Back.

  • On completion of the policy term, the last instalment of payout is made. Generally, money back plans also offer a bonus to the insured person which is accrued over the policy term and paid along with the last instalment.

  • In case of death of the life insured during the defined policy term, the entire sum assured along with accrued bonuses is paid to the nominees of the life insured. The survival benefit payouts already paid to the life insured are not deducted from this amount.

Basically, money back plans give small amounts to the life insured at regular intervals instead of paying the entire amount as a lump sum amount at the end of the term. It is a variant of the endowment plan with the benefit of liquidity.

Unit Linked Insurance Plans (ULIPs) are also good money back plans with all the above qualities. In a ULIP you get market linked returns along with life cover, maturity benefit, loyalty additions and the best of all you are free to make partial withdrawals as per your needs, no need to wait for the next payout. Plus, it enjoys all the tax benefits applicable to a life insurance plan.

Here's a 3 round takedown:

1. Round 1 - Life Cover

Term Life Insurance Plans provides you with a very high amount of Life Cover when compared to the Life Cover provided by a Money Back Life Insurance Plans by paying the same amount. For example, a healthy individual can get a life cover of Rs. 1 Crore for a nominal amount of only Rs. 700 per month under a Term Life Insurance Plan as against a life cover of just Rs. 20 Lakhs under a Money Back Life Insurance Plan by paying the same amount.

So, on death, a person’s nominee would receive Rs. 1 crore under a term life insurance plan. If he has opted for a money back life insurance plan, only Rs. 20 lakh along with all the accrued bonuses till date becomes payable.

Verdict: Round 1 goes to Term Life Insurance Plan since term life insurance plans do not have any investment component in them, they can easily provide very high life cover at the cheapest possible rates.

2. Round 2 - Return on Investment

Term Life Insurance Plans do not pay anything back to the life insured in case he survives the defined policy term. In short, if the insured person survives he forgoes the premiums paid by him under a pure term life insurance plan.

On the other hand, if a person survives the defined term under a money back life insurance plan, he receives a particular percentage of his chosen sum assured as Money Back payouts. The life insured is also eligible to receive bonuses as declared from time to time. These bonuses are accrued over the entire tenure of the policy and paid out along with the last instalment under the money back plan. In case of death of the life insured, the bonuses are paid to the nominee along with the life cover amount.

Verdict: Round 2 goes to Money Back Life Insurance plans as they provide survival benefits to the insured person. These survival benefits help in meeting the short-term goals of the insured person like paying for the children’s education or that vacation you wanted to take with your entire family and so on. These short-term financial needs can arise from time to time and money back plans can effectively help in meeting the same.

3. Round 3 - Tax Savings

Here, both the contenders, term life insurance and money back life insurance are on an equal footing. Both of them provide the same benefit to the life insured under Section 80 C and 10 (10 D) of Income Tax Act, 1961.

All the premiums paid under term life insurance and money back life insurance plans are eligible for a tax exemption up to Rs. 1.5 Lakhs under Section 80 C.

The proceeds from term life insurance and money back life insurance plans in the form of a death benefit, survival benefit and maturity benefit are completely tax-free under Section 10 (10 D).

If the life insured enhances his protection level by attaching health-related riders like Critical Illness, Surgical Care, Hospital Care, etc. to his term life insurance plan or money back life insurance plan, an additional exemption up to Rs. 25,000 is provided under Section 80 D of the Income Tax Act, 1961.

Verdict: Round 3 goes to both the contender's i.e. term life insurance and money back life insurance, they both receive one point each as they both are life insurance products and provide the same tax benefits under various sections of the Income Tax Act, 1961.

Point Summary

So, the point tally for both term life insurance and money back life insurance stands as under:

Category Term Life Insurance Money Back Life Insurance
Life Cover 1 0
Return on Investment 0 1
Tax Savings 1 1
Total Points 2 2

What will you choose, now?

People say that investment and insurance should be kept separate. We too recommend that, one should first secure his family with a term life insurance, and then compare various investment options available which include money-back plans, ULIPs and Mutual Funds.

Term Life Insurance is the best choice for people who are looking for a higher protection at nominal premiums.

While the other contender, money back life insurance is the best choice for people who have completed their protection requirements and now have enough money left to save and invest for meeting their short-term life goals through regular survival benefit pay-outs.

As you are different from the person standing next to you, your needs would also differ. Hence, it is important to choose what is best for you and the betterment of your loved ones in your absence based on your needs.

Here's a quite checklist to help you differentiate between term life insurance and money back life insurance.

Be sure about Term Life Insurance.
expert assist 100% buying & claim support
express claims Free Nominee Assistance
program
Rated 4.7/5

for Customer Satisfaction on Facebook
5,00,000+
Policies sold
last year
Rohit Sapra
Written by Rohit Sapra
Rohit Sapra, a licentiate, and currently an SME, is a seasoned insurance professional with previous work experience from Kotak and Birla Sun Life Insurance.
MUST READ
POPULAR OTHERS
multiple term insurance policies
Can I Buy Multiple Term Insurance Policies?
documents NRIs have purchasing term insurance policy
List of documents NRIs should have while purchasing a term insurance policy
documents required for term insurance claim
What Documents Are Required While Filing a Term Insurance Claim
endowment more preferable to term insurance
What Makes Endowment More Preferable To Term Insurance?
Refund on premium
Term Plan With Premium Refund
6 Types Of Term Insurance Plans in India You Must Know
6 Types Of Term Insurance Plans in India
  • Term Insurance Companies
  • Term Insurance
  • LIC Term Insurance
  • SBI Term Insurance
  • HDFC Term Insurance
  • Tata Aia Term Insurance
  • HDFC life click 2 protect plus 3d plus
  • Popular Searched Plans
  • Max life term plan plus
  • ICICI pru iprotect smart term plan
  • PNB metlife mera term plan
  • Canara hsbc obe iselect lumpsum term plan
  • Aegon life iterm plan
  • Birla sun life protect at ease term plan
  • More From Tax
  • Income Tax
  • GST
  • eFiling Income Tax
  • Income Tax Calculator
  • Income Tax Slab
  • Income Tax Refund
  • Popular Health Pages
  • Mediclaim Policy
  • Senior Citizen Health Insurance
  • Health Insurance for Parents
  • Critical Illness Insurance
  • Cancer Insurance
  • Health Insurance Premium Calculator
  • Life Insurance Types
  • ULIP Plans
  • Endowment Policy
  • Whole Life Insurance
  • Child Plan
  • Pension Plan
  • Investment Plan
  • GENERAL INSURANCE COMPANIES
  • National insurance
  • Oriental insurance
  • United India Insurance
  • Relience General Insurance
  • New India Assurance
  • TATA AIG General Insurance
icon Term Insurance icon Articles icon Term Life Insurance Vs Money Back Life Insurance
×

Get Lowest Rates for term Insurance

  • Secure
  • Licensed By
  • Payment Options
  • Car Insurance
  • Bike Insurance
  • Motor Insurance
  • Commercial Vehicle Insurance
  • Travel Insurance
  • Car Insurance Premium Calculator
  • Family Health Insurance
  • Senior Citizens Insurance
  • Group Insurance
  • Corona Rakshak Policy
  • Corona Kavach Policy
  • Super Topup Plan
  • Term Insurance
  • ULIP
  • e-Term Plan
  • 1 Cr Term Insurance
  • कार इन्शुरन्स
  • टू व्हीलर इंश्योरेंस
  • टर्म इंश्योरेंस
  • हेल्थ इंश्योरेंस
  • मेडिक्लेम पॉलिसी
  • Learn About Insurance
  • Network Hospitals
  • Cashless Garages
  • Get Android App
  • Learn
  • About Us
  • Contact Us
  • Careers
  • Sitemap
  • FAQs
Connect with us
Become a Partner
Become a Coverdrive POS Agent

Coverfox Insurance Broking Pvt. Ltd. : Unit D4131-4139, 4th floor, Oberoi Garden Estates, Near Chandivali Studio, Andheri East, Mumbai - 400072

Licence No. 478 , IRDA Direct Broker Code: IRDA/ DB 556/ 13 , Valid till: 26/12/2022, CIN: U66000MH2013PTC243810

  • Shipping & Delivery Policy
  • Privacy Policy
  • Cancellation & Refund
  • Terms & Conditions
Copyright © 2022 Coverfox.com. All Rights Reserved