What Do You Need to Understand Before You Purchase a Money Back Plan?
Updated On Aug 22, 2021
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One of the smartest ways through which an individual can plan their life investment cover is through a money-back plan. With a money-back plan, a policyholder does not just receive guaranteed money back in frequent time intervals, sum assured at end of plan duration, the bonus amount as decided by the insurance company, but also a sufficient life insurance cover for the entire plan term. Moreover, there are some insurance providers, who subject to some limitations, offer the benefit of extending the life coverage over the entire life of the policyholder. A money-back plan is an ideal investment option for individuals, who are seeking a plan that offers them guaranteed returns and also some specific returns at different life stages in order to meet certain huge expenses that can occur in the future. One needs to consider and understand a few significant things before they decide to buy a money-back plan:
To Know What a Money Back Plan Is?
A money-back plan is a life insurance cover that offers guaranteed returns over the duration of the insurance plan. The maturity benefit under a money-back plan can be slightly lesser than what is offered under an endowment plan. However, in case one considers the monetary value terms of both money-back plans and pure-play endowment plans, then they may come to terms that the former offers better returns, taking into consideration certain factors such as inflation and CPI/WPI. A money-back plan generally offers the following:
- This plan offers you insurance coverage for the sum assured just as a basic life insurance plan.
- This plan provides you with an assured way of receiving returns before the insurance plan matures. It is known as a survival benefit. The overall survival benefit might be equal or can be a little more than the sum assured.
- This plan offers a sum assured amount that accrues towards the end of the plan tenure. It is a guaranteed amount that one would get.
- This plan offers two types of bonus i.e. a reversionary bonus and terminal bonus.
Also Read: How to Choose the Best Mutual Fund?
To Know What a Money Back Plan Is Not?
It is crucial to understand as there are many individuals who end up comparing a money-back plan with a pure-play investment instrument. A money-back plan is a type of endowment life insurance plan that provides guaranteed returns after some years of beginning with the plan alongside the maturity value of bonus and sum assured. Being an insurance plan, it also offers coverage for the complete sum assured amount if the worst comes and the policyholder dies during the plan tenure. In case you are seeking an investment plan, then you should actively look for one such product and not an insurance plan.
To Know About Risk and Realize a Money-Back Can be Helpful?
The investment tools in the market are highly volatile and subject to risk. Thus, the best investment option would be one that balances the risks and returns so that certain investments are secure from market uncertainties. Experts are of the view that the best method of investment is to have the right mix of market investments with safe non-market linked ones that keep a portion of your money secure.
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.