Picture this: You’re in the middle of purchasing an insurance policy. The company offers you with a vast range of products to select from. Apart from understanding the technicalities, getting lost in a pool of investment plans is another level of madness. Rather than dreading the selection of the right plan, it’s always advisable to take the right help.

When you are in the process of selecting an insurance policy, you come across two most commonly preferred plans. They are none other than Endowment Plans and Money-back Plans. While these may often be batted against each other, both are two broad concepts with their own set of pros and cons. In order to avoid confusion, go through these minor differences for a better understanding of the two:

What is an Endowment plan?

What would it be like to own a policy with savings and insurance benefits? Well, if you’re wondering the same, then invest in this plan called an ‘Endowment Plan.’ It is an insurance policy which covers the life of an individual during unforeseen events as well as provides maturity benefits at the end of the term.

With an array of benefits, endowment policies are a risk free option. For starters, when the policy matures, the policyholder is flooded with choices for savings. Take a look at these other benefits in order to maximize your gains:

  1. Tax Benefit

Endowment plans are keen to provide their investors with tax saving options. According to the Income Tax Laws of India, the premiums which are paid by you can simply allow you to reduce your taxable income.

  1. Maturity Benefit

Once your endowment policy matures, you receive a sum by the end of the term which is called as a maturity benefit.

  1. Death Benefit

Death benefit is nothing but the sum of money your family receives at the time of your death. Additionally, it is also equivalent to the insurance cover of your policy.

What are Money-back plans?

A life insurance policy provides a life cover to the person who purchases it, known as the beneficiary. He/she is promised a fixed sum of money on the expiry of the policy.

On the other hand, a money-back plan is apt for risk averse individuals who not only wish through an insurance plan but also wish to maintain liquidity throughout. During an unfortunate event like death of the policyholder, the sum assured is received by his/her family without the deduction of survival benefit.

Here are a few benefits offered by a money-back plan:

  1. Tax benefit

Tax benefits are only enjoyed by those policyholders who pay premiums towards the money-back policies.

  1. Maturity benefit

A policyholder receives a maturity benefit if he survives the term of the policy.

  1. Death benefit

The death benefit is received by the nominee listed down by the policyholder at the time of his death.

  1. Survival benefit

The survival benefit is paid to the policyholder for as long as he is alive.

  1. Riders

Riders for critical illness, accidents, and so forth are provided by the money-back plans.

  1. Bonus

Money-back policies offer reversionary bonus. It is a type of bonus which is declared by the insurance company by the end of each year.

Now that you have a clear picture about how to invest money in either endowment plans or money back plans, when are you actually investing in one? But before you do so, update your investment plans and then, take actions accordingly. Compare the two policies from the hands of an expert and you’re good to go.

By Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles of partners on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to editor.webposts@gmail.com.