Why Do I Need a Money Back Insurance Plan?
Updated On Jul 02, 2021
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What is a Money Back Plan?
As compared to other traditional plans in the market who provide the pay-out at the maturity of the policy, a Money Back plan as the name says it all, offers guaranteed money back in between the tenure at fixed periods as defined in the policy contract in addition to other benefits such as maturity and death benefits. These small amounts paid at intervals are a percentage of the sum assured and are known as Survival benefits. Money Back plans not only offer a cover as well as it provides an additional source of secondary income.
Why Do You Need a Money Back Plan?
These types of plans have less risk involved and it also guarantees you the common benefits of any other traditional policy plans, in addition, you also offer a helping hand during times of financial crisis. If you choose the right Money Back Plan considering several factors such as, your financial goals, the duration that you have in mind to stay invested, deciding the appropriate duration for the pay-outs, etc, then you will be able to tackle any uncertainty that may arise in the future.
Key Benefits of a Money Back Plan
A financial crisis can arise at any point in time. Either you’re a well-settled businessman or an employee with a stable job profile, in times of a financial crisis, it becomes difficult to accumulate funds or even find sources to arrange the number of your needs. If you have a Money Back plan then it assures you an extra source of income so that you can meet the requirements and plan your future goals accordingly. These amounts that you receive in the form of Survival benefits can be utilized as per your preference or can be saved for emergency needs.
A policy is also an investment where Liquidity plays a major role. In other types of plans, the Liquidity of the investment occurs at the Maturity of the policy tenure. In such cases, you do get the sum assured amount after 20 years, however in between this phase many scenarios may come into the picture where you might require funds, the Money Back Plans provide liquidity in the form of Survival Benefits at fixed intervals, so whenever you need funds you will be prepared.
Many people follow the rule of investment even in the case of policies where they believe that if there are higher risks there will be higher returns. This does play out well for many of the risk-takers, however, if you’re one of the people who want to stay on the safer side then a Money Back plan is the best choice for you.
Money Back offers guaranteed returns in multiple ways. We can understand this with an example.
Mr ‘A’ has bought a Money Back Plan for a tenure of 25 years and has been promised a sum assured of 5 lakh. This means that Mr ‘A’ is liable to pay the required premium for 25 years. Suppose he has been promised a Survival benefit of 15% of the sum assured at an interval of every 5 years. In this way, Mr ‘A’ will receive 60% of the sum assured during these intervals and the remaining 40% at the time of Maturity with other accrued Bonuses. This results in getting guaranteed returns in two different ways.
Maturity and Death Benefits
As mentioned above, the Survival Benefits are a form of secondary source of income that you receive which can be saved and utilized later, but this plan does not exclude other benefits such as maturity and death benefits. The Survival Benefits are a percentage of the sum assured that you receive, which means the remaining amount is not lost rather it is paid at the maturity of the policy which is paid to the insured with other bonuses as mentioned in the policy documents. In addition to the Maturity Benefit facility, the Death Benefit is also a major aspect of this plan. In case of the sudden demise of the insured the sum assured is provided to the nominee of the insured person. Just like any other policy plan, suicidal death is not covered.
Bonus Amount at Maturity of the Policy
These Bonuses which are accumulated during the tenure are a percentage of the sum assured which the insured person receives during the pay-out. These bonuses depend on the performance of the insurance company in the market and on the obedience of the insured in regards to paying the premiums.
As you can see, with all these listed benefits you are not only securing your future but as well as you are creating a secondary source of income. It's just that choosing the right plan makes a difference because with the Money Back Policy you can add on Riders to increase the cover that you have bought.
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.