What are money-back and endowment policies?
An endowment policy covers life risk for a specified period. Under this, the sum assured is paid along with the accumulated bonus at the end of the term. Money-back plans are endowment plans that periodically return a certain percentage of the sum assured instead of giving a lump sum at the end of term. The percentage, the number of installments, and the intervening period between installments depends on the term and the policy. If a policyholder outlives the term, he gets the remaining corpus with accrued bonus. However, if the policyholder dies within the term, the death claim comprises the full sum assured—any survival benefit that may have already been paid as a money-back component is not deducted. The bonus is also calculated on the full sum assured. Because of the benefit of assured returns, the premium for money-back policies is higher.
An endowment policy covers life risk for a specified period. Under this, the sum assured is paid along with the accumulated bonus at the end of the term. Money-back plans are endowment plans that periodically return a certain percentage of the sum assured instead of giving a lump sum at the end of term. The percentage, the number of installments, and the intervening period between installments depends on the term and the policy. If a policyholder outlives the term, he gets the remaining corpus with accrued bonus. However, if the policyholder dies within the term, the death claim comprises the full sum assured—any survival benefit that may have already been paid as a money-back component is not deducted. The bonus is also calculated on the full sum assured. Because of the benefit of assured returns, the premium for money-back policies is higher.
