How to Increase the Returns from Your Money-Back Life Insurance Plan?

If there were a way to increase the returns from a money-back plan, every investor would definitely opt for it. Well, there are a few ways through which we can increase the return rate or get higher and better returns from a money-back policy. A money-back policy is opted for by the people who need regular incomes from the policy to cover their time to time huge expenditures. It is suitable for people with short-term goals. It is also opted for by people who invest in stocks just to save at least a portion of their savings. 

It offers lower returns than other life insurance policies because of some very valid reasons. The key reasons for the low return rate are as follows -

• When compared to other life insurance plans, the premium of a money-back plan is much higher.
• The bonus is lower in money-back plans when compared to an endowment plan.
• A money-back plan offers payouts at certain frequencies. The money obtained from these payouts is generally used for fulfilling short-term goals and planned expenditures. Hence, it does not earn returns.

Ways to Increase Returns from Your Money-Back plan

There are some effective ways to increase the return rate from your money-back policy. Now, if you re-invest in a fixed income or an equity investment instead of using it for expenditure(if not necessary), you will be able to earn a higher rate of returns.

There are three ways to re-invest. These 3 ways are -

• Fixed Income

If you re-invest the money you get paid regularly from your money-back plan in fixed income plans virtually, there is no risk. This is because the bonds offered are tax-free bonds. These bonds are backed by the Government and have good credit ratings. This strategy, however, does not beat the return rate of an endowment plan.

• Hybrid Investments

Balanced funds are hybrid debt and equity funds. They come with 60-70% of the portfolio invested in equities and the rest of the amount invested in fixed-income securities. The overall risk of the portfolios is comparatively lowered. If a little amount of risk is fine with the life assured, there have been excellent results in the past on returns. The return rates have been observed to even reach 15% higher. By re-investing in hybrid plans like balanced plans, you can reach higher rates of returns. In this strategy, we can see that the return rate of an endowment plan has also been beaten. It is, however, important to choose top-performing balanced funds in order to get higher return rates that can beat the return rates of endowment plans too.

• High-Quality Diversified Equity Funds

In this strategy, we have chosen high-quality diversified equity funds to re-invest in. It is observed that the return rates of re-investing in these high-quality diversified funds are much higher and at 13% excess. This strategy of re-investing beats the endowment plan return rates. It is important to choose top-performing funds to invest in to get good returns.

Conclusion

Money-back plans sure provide lower returns than other life insurance policies but because they pay at regular intervals and help in covering planned expenditures. If the life assured does not have to use the money for their expenditures, they can make a smart move and re-invest in fixed income plans, hybrid investment options, and high-quality diversified equity funds to get better returns and save the money. 

Also read 

Exploring Key Features of a Money Back Policy

Exide Life My Money Back Plan - Features, Benefits, 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.