Features of Money Back Policy In Life Insurance

Are you also looking for a secure retirement plan but have no idea where to invest? 

Looking at the myriad of options, this confusion is pretty common. But team InsuranceDekho is here to help! 

Among various life insurance policies, a money-back policy stands out! Read on to find out why! 

What Is Money Back Policy?

A money back policy is a life insurance policy that offers the policyholder regular income at different stages of life, along with a lump sum amount at a defined point during the policy period. 

The installment amount, also known as “Survival Benefit,” becomes payable after some years of the beginning of the policy, and if the insured is alive, it continues till maturity, ensuring a financially secure future. 

It is a good plan for people who want a regular income for their entire lifetime instead of waiting till the end of the policy term. The best part is that in the event of unfortunate death, this policy aids the families financially. 

Now, it’s safe to say that money back policies provide 3-in-1 benefits!  

Life insurance coverage + periodic money back benefits + lump sum maturity benefit.

Let’s understand the money back policy with an example - 

Maya purchased a money back policy with a sum assured of ₹2 lakhs for a period of 20 years. With this policy, she is also getting a survival benefit for a fixed duration of 5 years from the purchase date. 

Now, Maya will receive 20% (₹40,000)of the sum assured every fifth, tenth, fifteenth, and twentieth years. In the twentieth year of the policy, she will get the remaining ₹20,000 with bonuses, and the policy will end. 

In case Maya dies before the policy matures, then the nominee will receive the entire sum assured ₹2 lakhs, even if Maya already received the Survival benefits. (PS: This is the best part about this policy!) 

Features of Money Back Policy

• Regular payouts

The policy provides payouts in regular intervals to the policyholder. As per the terms and conditions of the policy, these payouts are the pre-determined percentage of the fixed amount. 

• Maturity Benefit

Along with the Survival benefits, the money back policy gives a lump sum payment as a maturity benefit. When the policy matures or expires, you will receive the remaining sum assured, along with bonuses. 

• Guaranteed Returns 

Money back policy provides guaranteed returns on the premium payments, which are given to policyholders in periodic installments throughout the policy term. The amount received in these installments is a portion of the sum assured, and the entire sum assured is paid out upon the policy completion.

• Bonus Additions

The policy offers bonus additions, and based on the policy performance, the insurance company declares bonuses that are added to the sum assured. 

• Premium Payment Term

This policy gives enough time to make premium payments. However, different insurance companies follow different protocols but many offer payment terms for 20 years or more.

• Life Insurance coverage

One of the best features of this policy is that the policyholder gets life insurance coverage for the entire duration of the policy. If the person passes away, the nominee will get the sum assured. 

• Flexibility

In terms of premium payment options, the money-back policy is quite flexible. The limited premium payment options allow you to complete the premium payments in a short period and let you take advantage of benefits for a longer duration. 

• Tax Benefits

This policy offers benefits to the policyholder under Section 80C of the Indian Income Tax Act, 1961, which states that the person gets a tax deduction of ₹1.5 lakhs on the policy premium payments. Along with that, the maturity and death benefits are also eligible for tax deductions under Section 10(10D) of the IT Act.

• Loan Facility

The policy lets policyholders utilize the loan facility by enabling them to borrow money against the surrender value at any time. 

• Liquidity

With this policy, the policyholder gets to enjoy the liquidity and savings offered.  Either towards the expense, debt clearing, or child education, you can use the amount in multiple ways. 

• Surrender Value

The money back policies offer guaranteed surrender value if the investor decides to discontinue the policy before maturity. This means that after the deduction of the surrender charges, you will receive a portion of the premium payments. 

• Death Benefit

In an unfortunate event, if the policyholder dies, then the nominee or beneficiary will receive the sum assured. This death benefit would be a guaranteed payout, even if the payouts were clear to the respective investor. 

• Add-on riders

Money back policies can be customized with extra options called riders. These include benefits like accidental death or critical illness coverage. They add more protection and benefits to the policy, making it more flexible to fit your specific needs.

Conclusion

Considering the above details, it is easy to conclude that money back policy is one of the best ways to have a financially supportive future. The regular payouts in the fixed time interval make it comfortable to rely on a particular source of income, and one can find the best way to invest the amount in the future.  

Frequently Asked Questions (FAQs)  

Ques 1. What is a money back policy?

Ans. A money back policy is a type of life insurance plan that offers periodic payments (survival benefits) to the policyholder throughout the policy term. These payments are a percentage of the sum assured and are made at regular intervals. If the investor survives the entire term, the remaining sum assured plus bonuses (if any) are paid out as a maturity benefit. 

Ques 2. Why should I choose a money back policy? 

Ans. Below are some of the benefits of a money back policy that make it a worthwhile investment.

• Regular payouts throughout the policy term
• Nominees will receive the full sum assured in case of the policyholder’s unfortunate demise. 
• Tax exemptions on premiums paid
• Customize the policy with additional benefits like critical illness cover or accidental death benefits. 

Ques 3. Is money back policy a risky option? 

Ans. As compared to other life insurance policies, this policy is a safer option. In fixed intervals, the policyholder will get the returns from the sum assured and survival benefits. 

Ques 4. What are the tax benefits of money back plans?

Ans. It reduces the tax liability under Section 80C of the Indian Income Tax Act, 1961. The policyholder gets a tax deduction of up to ₹1.5 lakhs on the policy premium payments.

Ques 5. What is the time frame to pay the policy premiums? 

Ans. Money back policies come with different premium payment terms (PPTs). So, you can choose from annual, half-yearly, quarterly, or monthly options according to your risk appetite. 

Ques 6. Do policyholders receive death benefits?

Ans. Yes! If the policyholder dies, the beneficiary or nominee gets the sum assured.