3 min read
Updated on Jul 13, 2022
What is endowment plan in life insurance? It is the traditional type of life insurance where you get to combine the elements of insurance and investment. The risk factor is low or non-existent. Money back plans are a type of endowment life insurance. Here, the investor is sure of getting fixed returns. A unit linked insurance plan (ULIP), on the other hand, is a type of life insurance where you can invest in the financial markets. The risk is higher but the chance of earning a higher dividend is prevalent too.
A money back policy is a type of life insurance where the maturity benefit is broken up into instalments and paid at regular intervals during the policy period. If the policyholder dies before the policy period comes to an end, his or her nominees receive the death benefit too. Thus, a money back policy has a life cover and a scope for investment as well. Money back plans are commonly taken by parents to secure the financial wellness of their kids. The payouts received at various points help to pay for the child’s education milestones. A money back plan is a type of life insurance endowment plan.
A ULIP is also a type of life insurance. However, the format of investment is different in a ULIP. Here, the premium you pay is divided into two parts. The first part is carefully kept in a life fund and it is used as the death benefit if you die within the tenure of the plan. The other part of the premium is invested in the financial markets. You can choose the type of investment you want. If you have a high risk appetite, you can opt for equity funds and if you have a low risk appetite, you can go for the cash funds.
Now that you know the ULIP meaning, money back policy meaning and endowment plan meaning, let us look at the key differences between a ULIP and money back plan:
As you can clearly see from the points mentioned above, there are some crucial points of difference between a money back plan and a ULIP. understand the features of each and then choose the type of life insurance policy that would be best suited for you.
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