What Are Money-Back Plans? How Do They Work?

Money-back plans are a type of savings plans. These plans provide guaranteed returns. Money-back plans are unique because under this plan the life assured not only gets life cover but also gets back his/her money vested with guaranteed appreciation in regular intervals during the policy term. Before you purchase a money-back plan must know what a money-back plan is and how it works.

What is a Money-Back Plan?

Money-back plans are those type plans where the life assured receives the money invested with guaranteed returns at regular intervals during the policy term. Under this plan the life assured receives periodical payouts that are known as survival benefits, these payouts are equivalent to a certain percentage of the sum assured. The life assured receives these periodical payout during the policy term and the rest of the sum assured is paid at the time of plan maturity.
In case the life assured passes away during the policy term, he/she is paid with sum assured irrespective of already paid periodical survival benefits. Money-back plans also provide a life insurance cover to the life assured throughout the policy term.

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How Does a Money-Back Plan Work?

Now that it is clear that the life assured will be provided periodical survival benefit payouts during the policy term. Lets understand how this plan works.

For instance you purchase a money-back plan and the policy term for the same plan is 25 years. You start to receive the periodical survival benefits at every 5 year or the policy term and the rest of the sum assured is paid at the time of plan maturity. In a case like this you will receive the periodical survival benefit in the 5th, 10th, 15th and the 20th year of the policy term. After the periodical survival benefit payouts are made, the remaining sum assured will be paid to you at the time of plan maturity. The survival benefit will be calculated as a certain percentage of the sum assured. The survival benefits will only be paid out if you are alive during the policy term, if not then the sum assured will be provided to the nominee irrespective of survival benefits already paid to you. 

The periodical payout of the survival benefits can act as an income source for a person which can help them to take care of any expenses in future. The periodical survival benefit payouts under this policy is what makes this type of plan unique from others.

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Conclusion

The reason why one should prefer a money-back plan over any type of life insurance plan is because, this plan provides life cover along with periodical survival benefit payouts with guaranteed wealth appreciation during the policy term. The rest of the sum assured is provided at the time of plan maturity. The amount of survival benefit can act as an income source for the life assured. It's a win-win situation for someone who wants a life insurance plan which provides guaranteed returns on their investment, life cover along with periodical payouts. This plan is very useful for people who have tons of responsibilities.

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.