Key Components of A Money Back Policy

Updated On Jun 15, 2021

Key Components of a Money Back Policy
Conclusion

Money Back Policy is one of the most popular insurance plans in India. This policy includes benefits of both a life insurance plan and an investment plan. This plan offers regular income along with maturity benefits just like other life insurance policies. It's a good way to plan for a regular source of income along with large expenses in the future. Bonus amount is also paid to the policyholder along with additional benefits under these plans along with survival benefits. However, in case of death or demise of a policyholder, the survival benefits do not accrue. In death cases, the nominee receives the whole maturity amount.

Key Components of a Money Back Policy

Following are the key components of a money back policy -

Survival Benefits

This benefit is to the life assured after the completion of a certain number of years over different time periods till the end of the policy term. This plan helps you to meet the financial expenses of the family. The structure of the payout of the survival benefit can vary from plan to plan and from insurance company to insurance company.

Death Benefits

Death benefits are provided to the nominee in case of death or the demise of the life assured. This does not include survival benefits because they are paid only when the policyholder is alive.

Maturity Benefits

It is a term used to denote all the amounts received by the policyholder on the maturity of the money back plan. These amounts include the sum assured, the remaining survival benefits, and the accrued bonus, if any.

Sum Assured

It is the amount for which the policy is taken. It is paid to policyholders on the maturity of the policy. It can also be given to the nominee in case of unfortunate events and the policyholder does not survive till the end of the policy term. It is also known as total cover chosen by the policyholder in the starting and upgraded in between.

Bonus amount

It is the amount paid by the insurance company depending upon its performance to the nominee or the policyholder and also if the policyholder paid all the premiums on time. There are mainly two types of bonuses namely reversionary bonus and terminal bonus.

Reversionary Bonus

It is declared at the end of every year by the insurance company for a variety of policies. It is added to the sum payable to the policyholder on the maturity of the policy or his/her nominees in case of policyholder demise or death. Reversionary bonus is of 2 types that are Simple Reversionary Bonus and Complex Reversionary Bonus. In the Simple Reversionary Bonus, it's not added to the total sum payable; it doesn't increase the sum assured. In the Complex Reversionary Bonus, a bonus is added to the payable sum at the end of every year. It has certain consequences: firstly it increases the sum assured and secondly sum assured has increased for the succeeding years from the previous year's sum.

Terminal Bonus

It is also known as persistence bonus and it is paid at end of the term of the money back plan or as a death benefit. It is paid at the discretion of the insurance company rather than a reversionary bonus that needs to be paid once declared but the terminal bonus is not certain as a reversionary bonus.

Conclusion

Money back policy offers a guaranteed return along with the benefits of a life insurance policy. It helps policyholders to meet with the expenses of the family at different stages during the policy tenure. It is thus a good idea to invest your money in these plans to enjoy dual benefits. However, before investing, make sure you are aware with all the key terms and components of these money back plans so that you make an informed decision.