A Guide To Money-back Policy

When looking at traditional insurance policies, insurers pay out a lump sum amount in the event of the death of the policyholder. The family or the beneficiaries of the policyholder tend to get the amount. This benefit amount is usually called a death benefit.  But would it not be great if there existed a plan in which you, as a policy holder could reap the benefits of the policy as well?

Well, a money-back plan is exactly that. It tends to provide its policyholders with some form of benefits in the form of survival benefits. That said, we look to uncover specifics associated with money-back policies through this article.

What Exactly is a Money-Back Policy? How does it work?

The money-back plans give out periodic paybacks to its policyholders. Thereby ensuring they have a steady source of income. This is especially helpful for those looking to meet specific financial goals during varying stages of life. That is, the benefit of a money-back plan is that the policyholder gets both an insurance policy as well an investment. Thereby ensuring that the policyholder earns more than just the death benefit due to them. 

Given that money-back plans give policyholders survival benefits, they may opt to use that for investment into other opportunities that may seem attractive. On average, a money-back policy with a tenure of 20years would pay out these benefits. Approximately 20% of the sum assured gets paid out periodically, whereas the rest of the amount is paid out at the time of maturity, along with a bonus, if any.

Additionally, in the event the policyholder does not survive till the maturation date, the nominee would receive the death benefits, that is, the sum assured and causing the termination of the policy.

How to choose a money-back policy suited for you-

Choosing an insurance policy can be daunting. When it comes to money-back policies, it is important to go for a policy that best suits your financial needs. However, as a general thumb rule, it would help if the policy in question provides you, the policyholder maximum benefits.
Key factors required to be are researched when looking to invest in a money-back policy include the following -  

• Policy Tenure

The average tenure for money-back plans is 20years, however, it may vary from one provider to another. Since investment policies are an investment keeping the ling term horizon in mind, one should definitely consider this as an important factor.

• Survival Benefits

Since the benefits got by policyholders in the form of survival benefits tend to be a percentage of the sum assured, knowing the exact breakup of the survival benefits and the sum assured is always helpful.

• Frequency of Payouts

As potential policyholders, you must look at the frequency at which you would receive the benefits provided by the insurer. Some plans may pay out their policyholders every 5 years, while others may have a different timeline.

• Tax Benefits

Policyholders should check if their money-back plan offers tax benefits. This may vary from provider to provider.

Criteria for Application -

There are certain criteria that would be required to be met as prospective policyholders of money-back plans. Given below is a high-level overview of the eligibility criteria-

1. Policyholders need to be above a minimum entry age and below a certain age limit. However, the exact age varies from policy to policy

2. The policyholders should be diligent when it comes to paying the sum assured. The guidelines for specific policies would outline conditions that would need to be adhered to.

Important Documents for Application-

The key documents one would need as pre-requsites for applying for a money-back plan include-

• Document for proof of age
• An address proof
• Application for the respective policy chosen
• In some cases, medical reports may be asked

For Whom is Money-back Policies Best Suited?

As is with any insurance or investment, the decision to buy a plan must be a well-thought-out one. After all, money-back policies are far less risky than mutual fund investments, however, the returns on the investment will be relatively lower. For specific benefits, you may definitely choose to opt for an added cover that is not included in your original policy.

Hence, when deciding whether to opt for a policy, you must consider your financial aspirations and goals. Allowing you to invest in tools best suited for your long-term needs. It comes down to your willingness to take risks based on your risk appetite. 

Also read: When Is The Most Appropriate Time To Purchase A Money-Back Plan?

What Makes The ICICI Pru Cash Advantage Money Back Plan So Good?