Features Of A Money Back Plan

Money back plan is also known as Anticipated Endowment plan with benefits of liquidity and known as Money back policy in the Insurance sector. We can define money back plans as a type of policy where instead of getting a huge amount at the end of the term; the insured person is entitled to get a particular percentage of the amount at regular intervals.

The amount which the insured person gets at regular intervals is termed as Survival Benefit and the remaining amount which can be obtained by the insured person at the end of the term is known as Maturity Benefit. One of the unique feature of the Money back plan is that it helps in providing benefits within regular intervals and it is a low-risk investment option.

Benefits of Money Back Plan

• Survival Benefit: The policy holder will get money in regular intervals over the term of the policy. Once the policy has been purchased; after a few years of payment of premium, the policy holder starts getting this amount which is known as Survival Benefit.
• Maturity Benefit: At the end of the plan tenure, the policy holder gets this amount which is the remainder after the payment of the Survival Benefits from the total sum assured.
• Death Benefit: In case of the death of the policy holder, the amount which is obtained by the nominee of the policy holder is known as the Death Benefit. This is the total sum assured amount without taking into account the paid Survival Benefits. This helps the policy holder to secure his family against any financial obligations even after her/his demise.
• Bonus: This amount is an additional advantage for the policyholder. A particular percentage of the total sum assured amount is calculated as the bonus and it gets added up annually. When the policy is matured or there is a death benefit to be claimed, the bonus is added up to the overall amount that has to be paid.

Salient Features Of Money Back Plans

• Regular Source of Income: Money back plan can be considered as a regular source of income because of the Survival Benefits that are obtained within regular intervals. The advantage of this is that the policy holder can fulfill certain financial requirements by the benefits obtained rather than waiting for the maturity to happen.
• Low-Risk Investment: Money back policy has a very low risk associated with them in comparison to other investment options like Mutual Funds, Stock investments etc. Mutual Funds and other investments are open to risks and have to go through various fluctuations in the Stock Market but Money back plans are not vulnerable to any such volatility in the capital market.
• Insurance coverage: This is the best part of the Money back policy. The insurance holders will be getting returns as well as coverage under a single plan. Irrespective of the returns that has been paid out as Survival benefits, if anything happens to the insurance holder then; the nominee will be able to get the entire assured amount.
• Liquidity: Since, there are returns within specific time intervals; the policyholders can enjoy the needed liquidity and make better financial planning for long term goals in life.

The Working Procedure

For example, someone purchases a Money back policy of Rs. 20 lakhs for a period of 25 years. So, she would need to pay a premium for 25 years and she would also be getting returns at regular intervals of let say 5 years. Let the percentage for obtaining Survival benefit be 20% of the total sum assured.

So, now she will be getting Rs.4 lakhs after the 5th year, 10th year, 15th year and 20th year. On maturity i.e. after the 25th year, she will get the remaining amount which will be Rs. 4 lakhs (Rs.20 lakhs-Rs.4 lakhs ) and any additional bonuses. However, if she dies in the 12th year; then as per the policy her nominee will get Rs.20 lakhs and the additional bonus even though she must have received the Survival benefits of Rs.8 lakhs.

Need for a Money Back plan

• Money back policy should be purchased by people who need money at specific intervals of time.
• In simple terms, a Money back policy is a savings plan which provides the Survival benefits on a regular basis, maturity benefits at the end of term and also the Accrued bonus as an additional advantage.
• There can be unpredictable and unprecedented situations when you would need financial back up and these Money back plans are a great help during those periods.
• With the help of the Money back policy, the amount saved can be used as a fund in many important tasks like business investment which is done on regular terms or education of children, etc.
• These policies can be used as a means for tax saving because the premiums that are paid and the amount obtained as Survival benefits are tax exempted. Hence, this can be a tax-saving tool as well.

Conclusion

Hence, Money Back plans make one of the favored options for investment among investors due to its benefits, liquidity offered, regular returns etc. But however, there are certain opinions on Money Back plans which claim them to be somewhat expensive in nature. So, a Money Back plan is useful depending on the planning which you have made for the returns that you are obtaining like re-investing or some big purchases etc. which can be of some financial help for you and your family.

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