- Term plans offer a substantial sum assured at a comparatively lower premium than endowment and money back plans
- Endowment and money back plans have the provision to offer regular bonuses
- Since endowment and money back policies have a surrender value, they can be used as collateral for availing loans
Endowment, money back and pure term plans are the popular forms of life insurance available in the market. While all of them offer a cushion during financial difficulties, there are several differences between these plans. Read on to know them and make your own choice.
Pure term plans offer a lump sum (sum assured) to your nominee in case of your demise during the policy term. However, if you survive the policy term, there are no benefits.
On the other hand, endowment plans have life insurance and savings weaved into a single product. Along with offering a life cover, they help you save in a regular and disciplined manner to build a corpus. A portion of the premium is allocated to provide life insurance cover while the other portion gets added to the savings component. In case of the unfortunate demise of the policyholder during the policy term, the beneficiary gets the sum assured. If you survive the policy term, you get the maturity value at the end of the policy term, along with the accumulated bonuses declared by your insurer.
Money-back plans are similar to endowment plans but these policies pay out small portions of maturity amount periodically along with a maturity value, in case the policy holder is alive during the policy term. Thus, endowment and money back plans fulfill the dual need of life insurance cover as well as savings.
For the same life cover, pure term plans cost much less than endowment and money back plans. This is because in addition to providing life cover, endowment and money back plans also have a savings component.
- Sum Assured and periodic payout
Term plan gives you the option to choose a higher sum assured at affordable premium.. For example, for a pure term insurance plan like Exide Life Elite Term Insurance Plan, a 30-year-old, can avail a sum assured of ₹2 crore with an annual premium of ₹13,661*, for a 20-year policy term.
However, if the policyholder survives the policy term, there are no payouts made. The key benefit is the high sum assured it provides. Policyholder’s family can meet their expenses and accomplish life goals with the substantial sum assured, in case the policyholder is not around.
For a life insurance with savings component, like Exide Life My Money Back Plan (uniform money back option), a 30-year old will pay an annual premium of ₹1 lakh, for 16 years for 20-year policy term. The sum assured will be around ₹11.98 lakh. However, this will also include additional benefits like regular pay-outs after every 5 years and a maturity value at the end of the policy term, provided the policyholder is living during the policy period. The benefits are explained below:
1ˢᵗ Money Back at the end of 5ᵗʰ year : ₹ 2,99,520
2ⁿᵈ Money Back at the end of 10ᵗʰ year : ₹ 2,99,520
3ʳᵈ Money Back at the end of 15ᵗʰ year : ₹ 2,99,520
4ᵗʰ Money Back at the end of 20ᵗʰ year : ₹ 2,99,520
Maturity Value on completion of policy term:
₹ 10,78,270 @ 8% p.a.
₹ 5,75,078 @ 4% p.a
You can use the regular payouts to meet financial goals during the policy term. In case of policyholder’s demise, their family will receive the full sum assured irrespective of whatever payout was made already.
Making a Choice
Now that you know the key features of endowment, money back and pure term life insurance plans, you can make an informed decision. If you are looking for a comprehensive life insurance cover at an affordable premium, term life insurance has an edge over endowment plans. However, if you are looking for multiple benefits like regular savings, steady periodic pay-outs, appreciable life cover, and a maturity benefit, endowment and money back plan is the way ahead.
Exide Life My Money Back Plan is one such non-linked participating life insurance plan which can double life insurance coverage in case of an accidental death along with guaranteed survival benefit payouts to address needs at different stages of your life.
We, at Exide Life Insurance, offer you a range of life insurance policies to suit your needs. Get in touch with us to know more.
*For a 30 year old, non-smoking male, having no pre-medical condition, availing Exide Life Elite Term insurance plan, for 20 year policy term and Rs 2 Cr sum assured
** For a 30 year old, non-smoking male, having no pre-medical condition, availing Exide Life My Money Money Back Plan, for 20 year policy term and Rs 11.98 lakh sum assured