There are a number of variations of the endowment plans like child plans and money back plans. Money back plans are in fact a very popular form of the endowment plans. Though similar in many ways, a traditional endowment plan and a typical money back plan have quite a few differences too. Depending upon your requirements, you can select the plan that suits you.
Maturity and death benefits - Both the plans have maturity as well as death benefits. If the policyholder survives the tenure of the policy, he will get the maturity benefit and if he dies, a death benefit will be available to the nominee.
Guaranteed returns - Unlike a ULIP, neither an endowment plan nor a money back policy is dependent upon the market. These plans invest your money at a fixed rate that is pre-agreed upon at the completion of the policy or at the time of death, whichever is earlier, you get the amount you were assured of. Hence the risk factor in both these types of policies is quite low.
Payout time - The biggest and most prominent difference between an endowment plan and a money back plan is that in the former, the sum assured is paid after the completion of the policy, while in the latter, amounts of money are paid at regular intervals during the tenure of the policy. For instance, in a money back plan, the policyholder may get 10% of the sum assured after completing 3 years and 15% after completing 6 years and so on.
Mortgage - An endowment plan can be used as a security to obtain a loan. However, you cannot use a money back policy for the same purpose, simply because portions of the sum assured are constantly deducted.
An endowment policy is perfect for a person who finds it difficult to save. For such a person, keeping money in a savings account and maintaining a healthy balance in the same would be difficult. However, if he/she invests the money in an endowment plan to secure a particular phase of life (a child's marriage or retirement), he/she can do it easily.
A money back plan is ideal for a person who needs a regular flow of funds. For example, if the policyholder wants to get a sum of money for his/her child's school admission, board examination fees and college admission, he/she can opt to get it out of the sum assured in a money back plan.
So depending on whether you want to save up a lump-sum amount of money for the future or want to assure a regular inflow of funds, choose your policy plan. Remember to compare the policies before you make a purchase and don't get lured by policies that just look attractive. Read the terms and conditions properly and find the policy that benefits you the most.
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