"Money Back vs Term Insurance: Choosing the Right Plan”
12:32 PM Dec 09, 2025 IST
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NE NOW NEWS
Updated At : 12:31 PM Dec 09, 2025 IST
A Money-Back Policy is a kind of life insurance plan, which includes paying a certain specific percentage of the sum assured regularly.
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While looking for a secure future, considering different plans becomes necessary. Money-back policies & term plans are the two most popular options, each having its own pros & cons. The choice depends on the priorities of an individual, & as both plans include an insurance component, they will need more study to make an informed decision. If an individual needs a pure protection plan at an affordable cost, opt for a term plan. But, if you want to avail the benefits of both insurance & investment, a money-back policy will best suit you. Also, consider your financial objectives, risk tolerance level, & investment horizon before making a decision. In case of any difficulty, consult a financial advisor who will help you determine which plan best suits your priorities.
What is a Money Back Plan?
A Money-Back Policy is a kind of life insurance plan, which includes paying a certain specific percentage of the sum assured regularly. It best suits those individuals looking for short-term investment options, financial security, & regular payments.
Under this plan, a certain amount or percentage of the sum assured is paid back to the policyholder at regular intervals. If the policyholder survives throughout the policy tenure, they will get the remaining amount of the sum assured. &, if the policyholder dies during the policy tenure, the full amount of the sum assured is repaid to the nominee, irrespective of the fact that the survival benefits have already been paid.
What is a Term Plan?
A term plan is a type of Life Insurance plan that offers coverage for a specific period, where the policyholder chooses the sum assured. This plan provides death benefits to the nominees of the policyholder in case of their death, hence offering financial protection. The policyholder gets financial coverage over the insured’s life in exchange for the premium paid.
Difference between Money Back Plan Vs Term Plan
Let us examine the differences between them to gain a deeper understanding & make an informed choice.
| Basis of Difference | Money Back Plan | Term Plan |
| Coverage | This plan offers the dual benefit of insurance & investment. | It is a pure protection plan which offers financial protection to the family members in case of the policyholder’s sudden demise. |
| Financial Support | The periodic payouts received help to meet family members’ routine expenses. | This plan does not offer any periodic payout throughout the policy tenure. |
| Return on Investment | Under this plan, if the policyholder survives the plan, the insurance company will pay the amount of the sum assured. | Under this plan, if the policyholder survives the plan, the insurance company will not pay the amount of the sum assured. But, under the term Insurance with Return of Premium plan, the premium amount will be returned. |
| Cancellations | It allows you to cancel the plan & get an assured amount at some nominal cost. | It does not allow cancellation of the plan; rather, it gets terminated in case of failure to pay the premium amount. |
| Premium Costs | It would cost around INR 50k to 70k annually. | It would cost around INR 8k to 12k annually. |
| Payouts | This plan is a complete package in terms it including regular payouts throughout the policy tenure, a death benefit if the policyholder dies, & a maturity benefit if the policyholder survives the plan. | This plan includes only payout at the time of the policyholder’s death. |
| Cash Value | As it includes allocation of funds towards investment & savings, it helps build cash value over a period of time. | This plan is a pure protection plan; hence, there is no accumulation of wealth. |
| Maturity Benefit | This plan includes payment of maturity benefit if the policyholder survives the plan, which includes the sum assured & bonuses, if any. | It doesn’t include maturity benefit in case the policyholder survives the plan. |
| Risk Appetite | These are also risk-free investments. | This does not involve any risk, as it offers life coverage only. |
Money Back vs. Term Plan: Which to Choose?
It becomes necessary to assess the financial objectives, risk appetite, & investment horizon.
One should opt for a Money Back Policy if:
- You are looking for a dual benefit, i.e. both insurance coverage & investment components.
- You are looking for a less risky savings plan which provides life coverage as well.
- You are looking forward to receiving periodic payouts to fulfil your short-term financial objectives.
One should opt for a Term Plan if:
- You are looking for adequate coverage at an affordable cost.
- You are the sole earning member in the family who wants to secure the financial future of your family members in your absence.
- You want to invest in a simple & cost-effective plan.
- You want your premium savings to be invested in some other investment plans to get high returns.
Are Term Plans or Money Back Plans the Best Retirement Plans in India?
Though both the plans, namely term plans & money back plans, help fulfil financial needs, they do not fall under the category of retirement products. Individuals looking for the Best Retirement Plan in India should consider purchasing annuity plans, pension plans, or NPS, as these plans are well designed to cater for the post-retirement needs. One should opt for dedicated retirement plans as they will provide long-term financial stability, which cannot be availed with either a term plan or a money-back plan.
Conclusion
One should choose a plan between the two which best suits their financial requirements, risk tolerance level, & investment horizon. A term plan is meant to offer financial protection at an affordable cost for those looking for a pure insurance plan & to manage their investments separately. Where, on the other hand &, money money-back plan offers the dual benefit of investment & insurance, though a bit expensive. Though both term plan & money back plan are considered as disciplined savings & offer financial protection, but not for retirement income. Hence, one should understand their requirements from the plan, make a comparison of multiple plans, & consult a financial advisor to assist in making a decision.