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Money Back Policy: Features, Benefits and How to Choose

Published On Nov 04, 2021 3:00 PM By InsuranceDekho

A money back insurance plan is a life insurance policy type that pays out maturity benefits in the form of survival benefits. These guaranteed survival benefits are the ones which are distributed evenly throughout the policy course. One of the prime motives behind buying a money back policy is because it gives periodic pay-outs, thereby ensuring a steady source of income, which ultimately helps the policyholders meet expenses at different life stages throughout the policy duration. 

Offering insurance and investment all at once, money back policies are the perfect option for people looking for a secure and assured return on investment in addition to providing them with an opportunity to increase their corpus through investment options. One of the key things to remember with a money back policy is that if the policyholder does not survive till the policy maturity, the nominee receives the death benefit (the entire Sum Assured) and the policy terminates. 

Features of Money Back Policy

Some of the prime features of money back policies include: 

  • Money back plans prove to be the low risk investment option along with the solution for insurance coverage.
  • Money back policies offer a regular source of income as ‘Survival Benefits’ for the policy term.
  • Money back policies pay the entire sum assured to the nominee even if the survival benefits are already paid in the event of the policyholder’s unfortunate demise during the policy term.

Money Back Policy Benefits

Some of the major benefits of money back policies that you can expect include:

  • Offers insurance cover during the policy term.
  • Pays out regular benefits throughout the term.
  • Serves as an insurance policy as well as a long-term investment with good returns.
  • Comes with tax benefits as per the Income Tax Act, 1961.
  • Less risky as compared to other investments giving similar returns such as mutual funds.
  • Enables long-term savings and regular income.
  • Guaranteed regular disbursement of amount. 
  • Certain money back plans increase death benefits even when the maturity date has passed and the last survival period, up to the time the life insured reaches the age of 100 years.
  • One can opt for add-on riders like specific illnesses, critical illnesses, disabilities, etc.

How to Choose a Money Back Policy?

If you want to attain the maximum benefits from your money back policy, it would be a must to choose the right plan in the first place. 

  • Note that when choosing a money back plan, you should look at the policy tenure. Keep in mind that the average tenure for a money back policy is around 20 years.
  • As money back policies provide policyholders with a Survival Benefit, it is a must for the policyholders to ascertain the percentage of the Sum Assured to be paid out in instalments. The amount must be enough to cover any expenses the policyholder might have.
  • The type of investments available through the investment component of the money back policy should be considered. Policyholders should also verify the duration of the pay-outs being made over the course of the policy term in the form of Survival Benefits. Some plans pay policyholders every 5 years, while other insurance companies have a different timeline depending on the policy tenure.
  • Policyholders must also check if the money back policy offers tax benefits. Note that some plans do not offer a tax benefit if 20% of the sum assured is being provided as a Survival Benefit.

Now that you are aware of the key things to take into consideration before you choose your money back policy, make sure you end up making the right choice of a money back plan. 

If in need of assistance in choosing the best money back policy, go ahead and get in touch with InsuranceDekho experts without giving a second thought.

Also read: Advantages Of Money Back Policies Which Makes It A Must Have

Who Should Consider Purchasing a Money Back 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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