Limitations Of Buying Money Back Plans
Updated On Aug 16, 2022
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Money back plans are the most popular life insurance plans in India. Under these plans, the policyholders get frequent payouts as the death benefit in case the policyholder stays alive. These packages comprise investment and insurance plans.
A money back plan is perfect for people who want a definite ROI on their investments and are searching for standard payouts and an insurance cover for the same money they are placing in as a premium. A standard life insurance policy only pays an amount after the development of the policy. The money back plan begins to pay a ‘survival benefit’ over the policy’s lifetime. This advantage is offered after a few years from the beginning of the money back plan and carries on until the money back policy matures.
Limitations Of Money Back Plans
All firms would use a similar method if the money back guarantee was ideal. Unluckily, no such thing is there as a perfect business plan. Here are a few of the disadvantages that are often connected with this tactic.
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Entices Dissatisfied Customers
According to a school of thinking, offering a money-back insurance policy encourages unwanted customers. Some customers prey on these guarantees and use them for their selfish achievements to place it differently. A few consumers will use a money back promise, and an even smaller percentage of these clients will lie. This danger does exist, and firms must be aware of it before offering a guarantee.
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Impossible To Meet Everyone's Expectations
The second thing to remember is that meeting all expectations is idealistic. Also, if your product delivers accurately what it promises, a few users will misunderstand the findings or fail to extract the intended value. This may cause worry between your firm and its customers, which can be damaging to your brand.
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Accounting Is Complex
Ultimately, if clients take benefit of money back promises, it may make your finances and bookkeeping difficult. You might have to alter cost sheets and income papers for the last months based on the length of the offer, which may affect your financial management. There is also the issue of credit card companies denying to offer refunds after a specific amount of time has passed.
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Complicated Accounting
Based on the offer’s length, you may need to update cost sheets and revenue papers from earlier months, compromising your ability to manage your money suitably.
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Expensive Premiums
This policy deals with surviving and death advantages. Thus, the risk concerned for the insurance provider is soaring. Thus, the premiums are higher than the standard life insurance policies.
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Lower Rate of Return
The return rate for the money back plan is lesser than other securities such as bonds, stocks, equities, mutual funds, etc. Thus, if you want an increased rate of return, a money back insurance policy is not feasible.
Money back insurance works for an investor searching for assured returns with the prospective for development sometimes in their lives to cover big expenditures that might come in the future. But, there are a few limitations to consider before buying a money back plan.
Conclusion
Most people look for a typical life insurance policy, but there is an issue if we need money before the term ends. A monetary disaster may occur anytime, and people need money to deal with it. A life insurance policy is useless if the policy's tenure has not expired. We can get a loan, but the amount can be restricted. The Best money-back insurance plan addresses the problem of liquidity during the plan's time by paying a fraction of the sum guaranteed monthly.
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