Insurance policies are crucial for the safety and security of your family in your absence. But most insurance policies do not offer many benefits other than the full amount you paid at the end of the insurance term, in case you survive.
What if you could find an insurance policy that actually rewarded you for surviving while also giving you the full sum assured plus interest upon the completion of your policy term? It may sound too good to be true, but such a policy exists.
A money back policy is an insurance policy that offers all the benefits mentioned above. Let’s learn more about this policy, including its details, features, and benefits.
What is Money Back Policy?
Money back policies are currently among the most popular life insurance policies in the market due to their benefits and features. The money back policy insures the policyholder for a said amount of time. After some years of paying premiums (e.g., 5 years), the policyholder will start receiving survival benefits.
As the name suggests, the survival benefits are paid to the policyholder by the insurer for surviving a part of the term of the insurance policy. These benefits are paid out at fixed intervals by the insurer to the policyholder on account of their survival until the end of the policy. The best part is that the survival benefits the policyholder receives are not deducted from your maturity amount.
Apart from the survival benefits, in case of the death of the policyholder, the selected nominee(s) will receive the full sum assured amount without any deduction of the survival benefits that had been previously paid to the policyholder.
If the policyholder/insured party survives the entire term of the policy, they are rewarded with a final survival benefit along with the full maturity amount, which is given as a final lump sum payment. Along with maturity benefits, the policyholder can also receive bonus payments from the insurer. However, bonus payments (except reversionary bonuses) are not guaranteed.
What Are the Features of a Money Back Policy?
A money back plan is a great investment tool that offers guaranteed returns along with life insurance coverage. The prospect of guaranteed returns makes it a popular choice among conservative investors, and life insurance coverage acts as a bonus. Money back policies are also great tax-saving investment options in India.
Section 80(C) of the Income Tax Act of India ensures any insurance premium paid for a money back policy is qualified for a tax deduction. However, the premium amount needs to be less than 10% of the sum assured value to avail of the tax deduction benefits.
Let’s look at the other features of a money back plan and how these plans can be a great investment as well as insurance prospect for you.
- One of the most lucrative features of money back policies is the promise of guaranteed returns at no risk. Market investments are risky and do not possess any guarantee on the returns for the investor. The guaranteed returns of money back policies help it get an edge over other market-linked plans.
- These policies offer add-on riders that you can use as per your requirements to get additional coverage, tax benefits, and a lot of other features. Add-on riders are available for critical illnesses, term insurance, and personal accident and disability.
- You are eligible and most often receive several bonus payments that are calculated on a yearly basis and paid at the time of maturity. There are two types of bonus payments that you can receive under these policies, namely, reversionary bonus and additional bonus.
What Are the Benefits of Money Back Policy?
If, as an investor, you are looking for a safe investment option that rewards you and provides guaranteed returns without any risk factors, a money back plan is the best investment option for you. There are various benefits that you receive by investing in these plans, let’s look at some of the top benefits of these insurance policies.
- Survival Benefits
The survival benefits offered by these plans are one of their best benefits. The wait time for you to see any return on your investments reduces, and you can get a tidy sum of money after only investing for a few years. You will also receive these benefits at fixed equal intervals as long as the policyholder is alive during the term of the policy.
- Maturity Benefits
When the insured party is alive and well throughout the policy term, they are entitled to the maturity benefits, which include the total sum assured, the last survival benefits, and any bonus acquired by the policy during its term. The maturity benefits are paid out in a lump sum at the term expiry of the policy.
- Death Benefits
In the case of death of the insured party during the term of the policy, the chosen nominee(s) are to be paid the entire sum assured of the policy along with any bonus that was added during the course of the policy. Any remaining survival benefits are not paid out since the insured is not alive anymore.
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