Money back plans are a type of life insurance policy that offers both investment and protection at the same time. As the name implies, it is a type of life insurance policy in which the insured receives a portion of the sum assured in regular installments in the event of an unfortunate incident rather than a lump sum at the end of the policy period. Indeed, a money-back insurance policy functions as a liquid endowment scheme. Such plans also give you guaranteed survival benefits during the policy’s duration and upon maturity. This provides more liquidity than other types of life insurance policies.
What Does the Money Back Policy Mean?
As the name implies, this policy returns money at regular intervals (often in installments after a few years). The payment amount, commonly known as ‘Survival Benefits’, is a percentage of the total sum assured. The remaining sum assured amount is repaid at maturity with bonuses. If the insured dies while the policy is in effect, the whole sum assured is paid regardless of any Survival Benefits that have previously been paid.
How Does the Money Back Policy Work?
Let us consider an imaginary situation to better comprehend how the money back policy functions. Mr. Mohit buys a 20-year money-back policy with an insured payout of Rs. 20 lakhs. The plan provides 20% survivor benefits every five years after the purchase date.
He will now earn Rs. 4 lakhs in the fifth, tenth, fifteenth, and twentieth years of the policy. In addition, in the 20th year, he will receive the remaining Rs. 4 lakhs along with vested incentives, and the plan will be terminated.
If he dies in the 15th year of the insurance, the nominee would receive the entire Rs. 20 lakhs, even if Mr. Sharma has already received Rs. 12 lakhs as Survival Benefits.
Why do you require a money-back policy?
Money back policy is similar to savings life insurance policies in that they offer a guaranteed return on investment as well as a regular monthly dividend. At the same time, it is one such life insurance policy that includes insurance coverage. So, this is an excellent choice for those seeking both security and money.
What are the advantages of a money-back life insurance policy?
A money back policy has numerous advantages. This is why it remains the most popular life insurance policy among investors of all ages and income levels. Here are some ways a money-back plan can help you.
Offers sum assured: In the event of an adverse event, the insurance company pays the nominee a lump sum equal to the sum assured. This sum can be used to cover a variety of expenses for your loved ones, allowing them to continue living their lives with financial stability. On the other hand, if the policy term ends, the insurer will give you survivor benefits at maturity. This will assist you in achieving your future financial goals, such as your dream home, your children’s education, retirement, and much more.
Provides insurance cover: A money back policy, while considered a successful financial product, is also an insurance plan. You can select a suitable policy to satisfy the financial needs of your loved ones. These plans increase reliability and allow your family members to live a dignified life even in your absence.
Carries a low-profile risk: Other investments, such as mutual funds, stocks, bonds, and shares, are all affected by market changes. A money-back plan provides guaranteed returns at regular periods. Regular income and insurance coverage make such plans dependable and hassle-free. If you wish to maintain a low-risk appetite, this could be an excellent choice for you. Money-back plans allow you to mitigate the risk in your portfolio. They can help you diversify your investments and establish a well-balanced portfolio of volatile and non-volatile assets.
Gives returns within a few years of investing: Money back policy provides a consistent source of income. Unlike standard life insurance plans, these plans provide not only maturity benefits but also a steady inflow of money at regular periods. In this regard, a money-back plan is similar to an endowment plan in that it provides returns soon after investment.
Offers additional benefits: Every year, an additional bonus known as a revisionary bonus is added to the money back policy. This benefit is finally paid out upon maturity. Insurers also offer a final incentive at the end of the term as a reward for remaining invested in the plan. These bonuses significantly improve the overall payout, allowing you to fund your life aspirations.
Offers tax benefits: Premiums paid under this plan are deductible under Section 80C of the Income Tax Act of 1961. However, the premium cannot exceed 10% of the policy’s sum assured. The sum assured amount is also paid tax-free under Section 10(10D) of the Income Tax Act of 1961, subject to the circumstances specified therein.
At last,
In our uncertain world, anything might go wrong at any time, and you may face financial difficulties. When you have a steady income stream and life insurance coverage, you have peace of mind and protection against financial trouble. As a result, a money-back plan is one such life insurance that can help you establish a nest egg for future growth and wealth. If you want guaranteed returns, low risk, and life insurance to protect your loved ones’ future, a money back plan is the best option. It also provides tax advantages and periodic returns to increase your overall liquidity. However, like with any other financial plan, it is critical to select a reputable insurer before investing in the appropriate plan.
