Understanding Money Back Plans in Detail
Updated On Sep 22, 2021
Money-back policies are designed to protect your family's financial interests in the case of death or catastrophic illness. Money-back plans, which are a true mix of insurance and investment, are among India's most popular life insurance products. As a policyholder, you will be rewarded every month for your survival under these plans. A money-back plan is ideal for people who want a guaranteed return on their investments as well as monthly payouts as well as insurance coverage for themselves; the money they put in is known as a premium.
How Does the Money-Back Guarantee Work?
Let's look at an example to see how a money-back insurance policy works.
- Assume the money-back insurance has a policy term of 20 years and begins paying survivor benefits after 5 years and continues to do so every 5 years, with the remaining paid at maturity. In such cases, the insured party would get a survival benefit in the fifth, tenth, and fifteenth years of the policy, as well as the remainder of the survival benefit at the policy's maturity in the twentieth year. This is in addition to the maturity amount and any relevant bonus.
- Assume the insurance was acquired when the insured's child was around 10 years old. If the child is studying for engineering or medical examinations and has taken coaching for the same, the first survivor benefit payment following the money-back policy's five-year period can be used to pay off tuition fees.
- When the child reaches the age of 20, the second installment of the survival benefit can be used to cover any expenditures for postgraduate study. If a large enough money-back insurance is purchased, the earnings can be used to pay even foreign school fees.
- The third survival benefit, which begins on the 15th year of plan membership, is paid to the insured when the child reaches the age of 25. This amount can be used to support the child's wedding expenses.
- The fourth tranche of the survivor benefit, along with the maturity amount and the reversionary bonus, will be paid out in the 20th year of the money-back plan. This money can be used to fund retirement years, or if the individual has previously saved for retirement, it can be used to purchase a home or pay for a long trip.
Buying a money-back plan with enough coverage implies that the amount recovered by the employee at maturity will be evaluated and may be used to pay for a range of significant expenses. These may include unavoidable expenses such as relocation fees to return to one's country after retirement, restoration of ancestral property, repair or remodeling of one's existing house, debt repayment on a car loan, and so on. In most cases, the maturity amount is a lump sum payment given to the policyholder at the maturity of the policy. The insured party can choose between annuities and regular payouts every quarter or month. These payments would help the insured person pay off large bills in the future. Most insurance companies or their financial advisers may design plans to fit an individual's requirements and ensure that they obtain a money-back policy that best meets their future needs. A money-back plan may be appropriate for you if you are looking for a plan that will help you anticipate future expenditures without having to worry about the safety or security of the money invested.
Money-back programs are an easy and convenient method to save. They provide numerous benefits that help policyholders maintain their present and future lives stable and secure. The money-back insurance coverage allows you to make monthly payments throughout the policy. The bonus is calculated on the entire sum assured; however, some insurance companies offer additional optional benefits. If you die at any point during the insurance period, the claim includes the whole sum covered, with no reductions for survivor benefits. Before acquiring a money-back policy or any sort of insurance coverage, you should carefully study the terms and conditions.
Also read - Are Money Back Plans really Helpful?
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.