Money Back Policy

Money back plans protect your family's financial interests from circumstances such as death or critical illness of the policyholder. Periodic payouts create wealth for meeting financial commitments at key stages in life.

Features of a Money Back Policy

A money back plan such as LIC money back policy or others has a host of benefits for the investor looking for a guaranteed return plan along with life insurance cover. The fact that a money back policy provides a payout after a few years and this continues through the life of the plan makes it a sure fire winner for any conservative individual who is looking for a safe and secure cover with guaranteed returns. Life insurance companies have come up with a host of benefits for people who are looking at money back plans as an investment cum insurance option. Additionally, most companies come up with new plans with various new features and benefits on a regular basis.

• Guaranteed Returns from a Money Back Plan

The guaranteed returns from a money back policy help it edge ahead of market-linked plans. A money back plan is an ideal investment for a person looking for a safe and secure investment. Since it also provides an insurance cover, a conservative buyer would find it the ideal go-to vehicle for definite returns. Most of the recommended plans for better returns are linked to the equity or debt market, which are not risk-free avenues of investment.

• Income During the Lifetime of the Money Back Plan

A money back policy guarantees that the insured party will receive a sum every few years to take care of any large expenses in the future. The survival benefits accrue every few years and forms a second source of income for the policyholders. These funds can be used to pay off loans, make a deposit for a house or an apartment, pay off the children’s tuition fees, or simply take a holiday. The survival benefit of a money back plan makes it a life insurance policy that is a notch above the other covers in the market. Other life insurance policies do not provide this cover.

• Bonus Amounts Help Increase Payout in a Money Back Policy

A money back plan comes with two types of bonus amounts – a reversionary bonus and an additional bonus. The reversionary bonus is the bonus declared as a percentage of the sum assured every year by an insurance company. This sum is added to the overall payment receivable on maturity of the policy or the worst happens.

• Add on Riders Available for the Insured to Increase Their Cover

All insurance companies offer optional add-on riders that the insured can, as the name suggests, ‘add-on’ to their money back policy. These riders may relate to specific medical conditions such as critical illnesses, personal accident or a term rider. Some money back insurance policies also give the option to continue the life cover even after the policy has matured.

Advantages of a Money Back Policy

A money back plan is one of the best life insurance policies for an individual looking for a guaranteed money return policy. These policies also work out well as the backup policy for aggressive investors who prefer to use the stock and commodities market to increase their wealth. Moreover, the fact that these policies also offer a guaranteed payout after a few years of investment means that they are offering much better returns than the standard life insurance policies which only pay when the policy matures. These policies also work well as a standard insurance cover. The nominees receive the money from the sum assured in case the unfortunate comes to pass.

1. They are low risk plans to invest in since the maturity benefits are guaranteed.
2. The endowment policy gives your loved ones financial security.
3. Endowment policies help you avail tax benefits.

• Returns Accrue Only After a Few Years

The best thing about a money back plan is that the returns accrue only after a few years of investment. In case of long term policies of say 15 or 20 years, the amount is paid every few years and adds up to a tidy sum. In addition, the rest of the benefits are paid on the maturity of the policy. The insurance companies provide this benefit in a two stage process. The first stage comprises of the amounts that are paid every few years. The first and the last payout periods are generally spread evenly over the life of the policy. This means that if you buy a policy of say 18 years, the survival benefits may be paid to you every three years starting from the sixth year to the fifteenth. The second stage comprises of the final payout that is larger than each of the previous payouts and given at the time of maturity of the policy with the maturity amount. Investors should note that survival benefits are paid only if the insured party continues to live. In the case of any unfortunate event that leads to the passing away of the insured party whether by accident or otherwise, then the survival benefits do not accrue and the nominees only receive the sum assured plus any bonus amount.

• Value of Money Higher with a Money Back Policy

Many sceptics counter that money back plans do not offer nearly as good returns as investment plans. However, they are generally missing the point of a money back policy. The thing to remember for people is that it is an insurance cover (one that pays back money over the lifetime of the policy but an insurance cover, nonetheless) and is not a pure play investment plan. The insured party receives three-way payouts – the survival benefits, the sum assured on maturity and the bonus. Leaving all things aside the real value of the survival benefits are likely to tilt the scales in favour of money back plans. Insured Receives the Full Sum Assured on Maturity

• Insurance Cover at the Same Time as Investment Returns

Though there are many other investment plans in the market that give returns at the end of the investment period or in some cases, over the lifetime of the policy, only a money back plan offers the triple advantage of maturity benefits, survival benefits and insurance cover. In fact, with these policies, the advantage is actually four-fold as you also receive a bonus that results in a significant increase in the overall payouts received from the money back plan. Bonus at Maturity Significantly Increases the Overall Payout

• Counters Vitality of Market-Linked Investments

The returns from the stock and commodities markets are highly volatile with even the best investments not being safe from the vagaries of the market. Any person who uses the stock market, whether directly buying the equities and commodities by themselves or relying on mutual funds, will be able to safeguard at least a part of their money using a money back plan or two. A money back policy should be a part of the portfolio of any individual. It guards against loss of income from other investments due to the guaranteed nature of the returns. The insured party receives not only a definite return of the investment amount but also an insurance cover that ensures his nominees receive the sum assured to carry on with their lives in case the unfortunate happens. In addition, the survival benefit is the true plus point for money back plans. These benefit can be used to pay off expenses in various stages of life or even make investments. The money can be used to pay off loans, buy a house or real estate, invest in fixed deposits and so on.

• Secure Investments with a Money Back Plan

TA money back policy is a good way to plan secure investments. Since the returns are guaranteed, they make an ideal investment vehicle and ensure the investor gets his or her money back in a worry free manner. If used in tandem with stock market investments, like mutual funds, a money back policy can help reduce the risks of the investor’s overall portfolio. Moreover, the money back plan helps to guard against any risk to certain funds that are definitely needed in the future.

• Tax Savings with a Money Back Plan

All life insurance premium paid under a money back policy qualifies for tax deductions under section 80C of the Indian Income Tax Act, up to the specified limit, as long as the premium is less than 10% of the sum assured. This means that policyholders can reduce their tax liability by opting for a money back plan. Moreover, the maturity amount is exempt from tax deduction at source as long as the sum assured is more than five times the premium paid for the policies. People who are looking for safe guaranteed returns can use this tax benefit to further increase their money as they will now also save on tax in addition to getting the survival benefits, sum assured on maturity as well the bonus from the insurance company.

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