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How The Money Back Policy Works?

Updated On Jun 15, 2021

Money Back Policy is an investment cum life insurance policy which gives your money-back at an appreciated value at regular intervals during the policy tenure.The plan provides you with a percentage of sum assured throughout the tenure of the policy to help you meet your regular financial obligations. 

Along with basic benefits it also provides you an opportunity to grow your wealth through investment opportunities. Concept of a money back plan is quite similar to an endowment plan. However the returns are not market linked since these plans invest in asset classes which will yield low but fixed returns. Money back plans are the best saving plans which you can count on during a financial crisis. 

How The Money Back Policy Works? 

Let’s get a clear understanding of how a money back plan works with the help of an example. 

For instance, Mr. Sanjay purchases the Kotak Premier Money Back Plan which features a sum assured of Rs. 5 Lakh. He chose a tenure of 20 years for the plan and paid premiums at annual intervals for a Premium Payment Term of 10 years.

Under the plan, Mr. Sanjay received regular payouts equivalent to a 20% of the basic sum assured every 5 years in the plan starting from the 5th policy year, i.e, at 5th, 10th, 15th, and 20th year. Also, on the plan maturity, Mr. Sanjay will receive a Maturity Addition equivalent to 20% of the basic sum assured.

Besides the regular payouts and the maturity addition, the plan also offers life cover to Mr. Sanjay. Under the life cover, his nominee is eligible to receive a Death Benefit in case of Mr. Sanjay’s unfortunate death before the completion of the policy term.

Elements of a Money Back Plan

A money back plan usually comes with the following elements - 

  • Regular Payouts

The policy provides a regular source of income in the form of 'Survival Benefit' throughout the duration of the policy. 

  • Maturity Benefits

These benefits are paid to the life assured as the sum assured at the end of the policy tenure along with the survival benefits. These benefits include all the amounts which consist of three components such as the sum assured, the bonus, and the remaining survival benefits. 

  • Death Benefits

The nominee of the policy gets the sum assured and bonus if in case of an unfortunate event such as, death of the life assured. In such cases, Bonuses accrued on the policy are also provided to the nominee along with the sum assured. This doesn't include survival benefits as it is paid only if the policyholder is alive. 

  • Bonus

This amount helps increase the payout in a money back policy. But the bonus part is mainly dependent on the performance of the company and on the nature of the policyholder. Bonus includes the two types such as Reversionary Bonus and an Additional Bonus. 

  • Surrender Benefit

The guaranteed surrender amount is payable to a policyholder after the completion of 3 years received from the insurer. Policy can be surrendered only after It accrues cash value after the payment of premiums in 3 years.


In this way, the money back policy works for its users. It is known as the best money saving plan for the policyholders. Customers enjoy the dual benefit of investment cum insurance policy at the same time in just a single policy. 

Also read 

Key Components of A Money Back Policy

Money Back Policy: An Overview and Key Details

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.       

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