A money back policy is one of the best investment plans that allows the insured to receive monthly payments or a lump sum payout at a preset time during the policy’s tenure. The returns on money back policy might be guaranteed, depending on investment performance or a mix of the two. This allows you to acquire Money Back coverage that is customised to your individual financial goals.
What is Money Back Plan?
Instead of getting the lump sum amount at the end of the term in a money back policy, the insured person gets a part of the sum promised at regular intervals. It’s one of the best investment plans that include a liquidity component.
This policy is appropriate for risk-averse individuals who wish to save money via an insurance plan while retaining liquidity. If the insured person dies, the nominee gets the whole amount promised, with no survivor benefits deducted.
How Does A Money Back Policy Work?
A basic insurance plan pays out a lump sum payment to the policy’s nominee in the event of the life insured’s death. This is referred to as the life insurance death benefit. On the other hand, a money return policy is a kind of life insurance policy in which the insured receives a part of the amount promised at regular intervals rather than a lump payment after the policy term. As a consequence, a money-back insurance policy is a liquid endowment program.
The sum received as payments is referred to as the ‘Survival Benefits.’ These are reimbursed during the policy period, and the remaining amount insured, together with any vested incentives, is paid at maturity.
Why Do You Need to Purchase a Money Back Policy?
Here are some of the reasons why a Money-Back Guarantee is a smart option for you:
Money-Back intends to combine the advantages of an insurance policy with those of investment, resulting in a policy that generates an income for the policyholder rather than just giving a lump sum payout in the case of death.
These best investment plans provide a guaranteed return on investment and yearly payments and insurance coverage, making them an attractive alternative for those seeking both security and income. Consequently, policyholders get a guaranteed and predictable return on investment and the possibility to enhance their wealth via investments.
The best investment plans may be prudent based on your life stage when you invest and the many types of money back. A money back policy for children, for example, may help you adequately secure their future.
Features of Money Back Policy
Before acquiring Money Back insurance, whether it is a child money back policy or any other kind of coverage, you should be aware of the following features:
1. Guaranteed Returns
Money is reimbursed to the life insured as a survival reward after a predetermined period of time. If the insured survives the insurance term, the money is guaranteed. In the case of the policyholder’s death, the nominee gets the stipulated money as well as any accumulated bonuses, if any. This is also true for kid Money Back schemes.
2. Earnings During the Policy Term
Money-Back insurance assures that the insured will get returns or the sum specified every few years. As a consequence, the survival value accumulates over time and serves as a supplemental source of income for policyholders.
These monies might be used to take a vacation, save for an unforeseen expenditure, make a down payment on a home or apartment, or pay off the children’s school or tuition bills. As a consequence, money back policies outperform other forms of life insurance.
3. Riders to Boost Coverage
As the name indicates, most insurance firms provide optional add-on riders that the insured may ‘add on’ to their money back policy. These riders might result from medical conditions such as life-threatening diseases, personal injuries, or term riders.
4. Bonus
The Money Back insurance adds to the insured’s income as an added advantage. Each year, the incentive is calculated and accumulated as a percentage of the money covered by the insurance provider. The earned bonus is added to the total amount owed when the insurance matures or the insured dies.
Benefits of Money Back Policy
Let’s take a look at some valuable benefits of this best investment plan:
1. Survival Benefit
Money is given to the policyholder every few years for the insurance term. The payout starts a few years after the insurance is issued and continues until the policy matures.
Consider the following scenario: Akash has selected money-back insurance with a guaranteed payout of Rs. 5 lakhs over a 20-year term. He must pay a 20-year premium and will get a share of the money promised at regular intervals.
Depending on the policy conditions, he may earn 15% of the total promised as a survival benefit after the 5th, 10th, and 15th years of the policy, which is 15 X 3 = 45 per cent of the sum assured. He will also get the remaining 55% of the guaranteed sum, plus any bonus at maturity.
2. Death Benefit
The insurance nominee will get the death benefit in the case of an unfortunate incidence. This includes the amount promised as well as any incentives earned under the money-back program. This excludes the survival bonus, which is only given to the insured while they are still alive.
3. Maturity Benefit
When the money back policy matures, the insured person gets the maturity benefit, which consists of:
- Sum Assured: It is the total amount of coverage chosen by the insured at the commencement of the policy.
- Bonus: This includes any stated reversionary benefits accrued by the insurer over time. The company’s performance heavily influences this.
4. Tax Benefit
Section 80C of the IT Act permits you to deduct up to Rs. 1,50,000 in life insurance premiums each year from your taxable income. Furthermore, Section 10(10)D exempts the money-back policy’s maturity benefit from taxes.
Wrapping It Up
Money back policy makes sense for an investor seeking guaranteed returns with the possibility of growth and payouts at specific points in their lives to cover high costs that may arise in the future. However, before choosing the best investment plan, there are a few things to consider.
Examine your financial objectives to determine whether they are compatible with the advantages of the Money Back guarantee. Assess your risk-taking ability as an investor. Overestimation and underestimation may both harm your investment results in the long run.
