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Understanding the Working of Money Back Policy

Published On Sep 07, 2021

During the life of the policy, you will continue to receive a portion of the sum insured under a money return plan. It is preferable to satisfy financial commitments when you need money rather than waiting for the entire policy term to collect the returns. However, the returns are not market-linked because they invest in asset types that produce low but consistent returns.

How Does the Money Back Insurance Policy Work?

Let’s understand the working of a money back insurance with the help of an example - 

  • Assume the money-back insurance has a 20-year policy term and begins paying survivor benefits after 5 years and continues to do so every 5 years, with the remainder paid at maturity. In such circumstances, the insured party would get a survival benefit in the 5th, 10th, and 15th years of the policy, as well as the rest of the survival benefit at the policy's maturity in the 20th year. This is in addition to the maturity amount and any bonus, if applicable.
  • Assume the policy was purchased while the insured's child was about the age of ten. In this scenario, the first survivor benefit payment after the money-back policy's five-year period can be utilized to pay off tuition costs if the kid is studying for engineering or medical exams and has taken coaching for the same
  • The second payment of the survival benefit obtained when the kid reaches the age of 20 can be used to cover any costs for postgraduate education. If a sufficiently significant money-back policy is chosen, the proceeds can be utilized to cover even international school costs.
  • The third survival benefit, which accrues on the 15th year of participation in the plan, will be paid to the insured when the kid reaches the age of 25. This sum can be utilized to cover the child's wedding expenditures.
  • The fourth installment of the survival benefit will be paid out in the 20th year of the money-back plan, together with the maturity amount and the reversionary bonus. This money can be used to support retirement years, or if the individual has already saved for retirement, it can be used to buy a property or pay for an extended vacation.

Also read - Are Money Back Plans really Helpful?

Purchasing a money-back plan with appropriate coverage means that the amount recovered by the employee at maturity will be considered and may be utilized to pay a variety of large costs. These may include inevitable expenses like relocation costs to return to one's homeland after retirement, rehabilitation of the ancestral property, renovation or remodeling of one's current home, paying off a vehicle loan, and so on. In most situations, the maturity amount is a lump sum payment made to the policyholder upon the policy's maturity. The insured party has the option of receiving annuities or regular payouts every quarter or month.

These payments would assist the insured person in paying off big costs along the road. Most insurance firms or their financial advisors can build plans to meet an individual's demands and guarantee that they receive a money-back policy that best meets their future needs. If you are searching for a plan that will help you plan future costs without having to worry about the safety or security of the money invested, then a money-back plan may be ideal for you.


Money-back plans are a simple and handy way to save. They provide several benefits that assist policyholders in keeping their current and future steady and safe. The money-back insurance policy offers you the benefit of monthly payments throughout the policy. The bonus is computed on the total sum assured; however, some insurance firms offer extra optional advantages. In the case of death at any time during the policy period, the claim includes the full sum insured without any deductions for survival benefits. You should also read the terms and conditions before purchasing a money-back policy or any type of insurance coverage.

You may also like to read - Money Back Plan V/S Term Insurance

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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