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Money Back Policy--- A Comprehensive Guide

Updated On Aug 08, 2021

A money back plan safeguards the financial interest of your family from situations such as critical illness or death of the policyholder. With the payouts at regular intervals, the wealth accumulated helps in meeting various financial liabilities at different phases of life. A money back plan serves dual purposes by acting as both an insurance product as well as an investment tool.

Why is a Money Back Plan Required?

A money back insurance plan offers period pay-outs, ensuring a steady income source to assist the policyholder in meeting the expenses at different life stages during the plan period. These insurance plans provide a guaranteed return on the investment done along with periodic pay-outs and insurance coverage, thus, making it an optimum insurance plan for individuals who want both an income source as well as protection. A policyholder under a money back plan is offered a maturity benefit along with regular income in the form of ‘survival benefits’ for the policy duration. Therefore, it offers a safe and assured return on the investment done alongside offering them an opportunity to build their wealth via investment opportunities.

How Does a Money Back Plan Functions?

A money back plan is a kind of insurance plan that provides survival benefits along with investment opportunity and maturity benefits to the policyholder. An average money back plan having a policy duration of over 20 years would thus pay the policyholder a lump sum amount called survival benefit a few years after the beginning of the policy. A periodic payment of around 20% of the sum assured, while the remaining amount would be paid during the time of policy maturity with a bonus, in case any.

In case the policyholder dies before the maturity of their insurance plan, then the nominee would be entitled to receive the death benefit and the plan would get terminated.

Salient Features of a Money Back Plan

Some of the common features of a money back plan are listed as follows:

  • A money back plan offers a regular income source in the form of survival benefits for the policy tenure.
  • A money back plan offers the policyholder with an insurance cover as well as a low risk investment option.
  • In case of the death of the policyholder during the policy duration, the nominee receives the whole sum assured irrespective of the sum already paid via the survival benefits.

How to Select a Money Back Insurance Plan?

Selecting a right money back plan is necessary to ensure that an individual receives the maximum amount of benefit for a specific insurance plan. At the time of selecting a money back plan, the customers should look at the duration of the policy. The average duration for a money back plan is around 20 years.

A money back insurance plan offers survival benefits to the policyholders, it is must for a policyholder to ascertain the sum assured percentage that would be paid in installments. This sum should be sufficient to cover any expenses that the policyholder may be having. The kinds of investments available via the investment component of the plan should be considered. A policyholder must also check the pay-out periods being done over the policy duration as the survival benefits. There are some insurance plans that pay the policyholders every five years, the rest have different timelines based on the duration of the policy.

Benefits of a Money Back Insurance Plan

Some of the benefits of a money back insurance plan are discussed as follows:

  • A money back plan offers insurance coverage during the duration of the plan.
  • This plan pays out regular benefits throughout the policy duration.
  • A money back plan offers tax benefits to the policyholder.
  • A money back plan serves the dual purpose of an insurance plan as well as a long term investment option with high returns.
  • It is less risky than other investment instruments that offer similar returns such as mutual funds.
  • It enables regular income sources as well as long term savings.
  • It ensures that the amount gets disbursed on a regular basis.
  • There are multiple optional riders that offer coverage for conditions such as disabilities, critical illness, specific illness, etc.

You may also like to read - Reasons to Buy a Money Back Insurance Plan

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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