WHAT IS MONEY BACK POLICY

Money Back Policy is better known as a financial tool, which is a life cover but acts as an investment. This policy remains to be better known as life insurance that offers protection and returns throughout the policy term. This benefit sets it aside from traditional life insurance.

This policy highly resonates with consumers who need both security and liquidity in their financial planning. It is particularly useful for people who want to set aside funds for future expenses like education or weddings, but do not want to let their family’s dream shatter in their absence.

As you will now learn many aspects of this policy, it will enable you to appreciate why this insurance policy is so popular among people for their long-term financial plans. Here’s what you will read in this article.

 

 

What is the Money Back Policy?

Money back insurance policy is a specialized policy that provides a life cover and also gives returns at regular intervals. Unlike life insurance, it rewards the policyholder with a return on investment, often called survival benefits.

These policies ensure you receive a percentage of the sum assured during the policy term. Planning investment aspects, it helps provide security and ensures liquidity at the same time. 

 

Key Benefits of Money Back Policy 

Money Back Policy provides a distinct combination of insurance and investment returns. It is appealing to many investors and provides many benefits. 

1.Periodic Returns / Survival Benefits

One notable benefit of the money back plan is periodic returns. Contrary to other life insurance plans, the money back plan provides survival benefits up to some percent of the insured amount. This can help achieve financial goals or for emergencies.

2. Provides Liquidity

The survival benefits of a money back plan facilitate cash to fulfill short-term financial goals or needs.

3. Insured Sum on Maturity

Policyholders, at the end of the policy term, will receive the full insured amount. Availing survival benefits does not reduce the fixed insured amount.

4. Life Cover Protection

In the case of an unfortunate event of death, the dependents of the policy holder receive the financial protection.

5. Tax Benefits

Investors can avail of tax benefits under Section 80C2 and Section 10(10D)2 of the Income Tax Act.

6. Minimum Market Risk

Unlike stocks, bonds or mutual funds, money back plans can offer guaranteed returns as they are less prone to market risks.

 

Types of Money Back Insurance?

Below are the different types of Money Back Policies and their benefits:

1. Traditional Money-Back Plan

• Provides fixed payouts at regular intervals.
• Offers a lump sum at maturity plus bonuses.

 

2. Child Money-Back Plan

• Designed to fund a child’s education or milestones.
• Pays out benefits at key stages like school, college, or marriage.

 

3. Retirement Money-Back Plan

• Offers regular payouts post-retirement for steady income.
• Ensures financial stability during retirement years.

 

4. Endowment Money-Back Plan

• Combines savings and insurance.
• Provides periodic returns with a maturity benefit.

 

Each type of the above plan cater to different financial needs, so the suitability of them depends on your life stage and priorities.

 

How Does Money Back Policy Work?

Let's try to understand how money back policy works with an imaginary example of Mr. Reddy.

We will assume that Mr. Reddy purchases a 20-year money back policy that comes with an assured amount of Rs. 30 Lakhs. The plan offers 20% of the assured amount as a survival benefit after every 5 years.

Now, Mr. Reddy shall receive Rs. 6 Lakh in 5th, 10th, 15th, and 20th year from the date of purchase. He shall also receive the remaining Rs. 6 Lakh at the end of their policy term along with some other benefits.

And, if Mr. Reddy passes away after 10th year, his nominee is liable to receive the entire Rs. 30 Lakh even if Mr. Readdy availed Rs. 12 Lakh in the first 10 years as a survival benefit.

 

How to Choose the Right Money Back Policy?

There are multiple factors which you must consider while selecting a money back policy.

1. Financial Goals
Start with identifying your financial objectives and goals, and later outline which coverage is sufficient for you and how much you wish to invest.

 

2. Search and Compare Plans
After finalizing the objectives, search for different companies and their money-back plans. Prefer those with a good reputation and customer support.

 

3.Claim Settlement Ratio
Claim Settlement Ratios of the insurers you are considering for purchasing the policy will give you an idea of how quickly they have settled the claims so far. It’s always better to ensure before you invest.

 

4.Terms and Conditions
Consumers neglect reading terms and conditions and regret it later when their claims are rejected. All the terms and conditions related to money back policies are crucial to understand to select the right policy for yourself.

 

5.Check Online Reviews
Read reviews and comments of the existing policyholders on online review platforms. This will assist you in determining how satisfied people are and whether there are serious issues that might concern you.

 

Eligibility Criteria for Buying Money Back Policy

Knowing the eligibility criteria before purchasing the money back policy is vital. Here are some requirements for purchasing the money back plan:

• People who are 18 to 65 years old qualify for these plans. The upper age limit might vary from insurer to insurer.
• The applicants should be able to maintain a steady source of income to cover the premiums.
• Certain health conditions can also restrict eligibility. In some cases, insurers also ask for medical checkups and health declarations.
• Citizenship of the country where you are buying insurance is also mandatory.

 

Documents Required for Money Back Insurance Policy

During the application process for a money back policy, having all the required documentation is essential. Ensure you have the below documents handy while you proceed to buy the insurance.

1.Identity Proof

Proof of identity is among the top document requirements. Acceptable forms of identity documents include government IDs, Aadhaar cards, and passports.

2. Address Proof

It is another crucial requirement. Utility bills and bank statements that show your address can be used as supporting documents.

3. Proof of Age

Risk assessment can be done accurately after age proof is provided. Commonly accepted forms of age proof include birth certificates and educational certificates.

4. Income Proof

It helps in determination of eligibility and coverage amount. Recent salary slips or tax returns should suffice in most cases.

5. Medical Reports and Certificates

Insurers ask for these documents to assess your health record and identify existing ailments.

 

Final Thought

Most people would consider selecting a money back policy as an informed decision. Protection and returns, both are possible with a single policy, which is an added advantage.

Knowing your financial goals is essential, and creating a framework to meet those goals with a money back insurance policy will yield maximized value from the policy.

Consideration factors such as premium payment frequency, coverage amount, and tenure. Each element is important for determining how well this plan meets the specified requirements. 

Knowledge is a powerful tool that allows you to make choices. It’s not only about getting returns, but securing one’s goals for the future. 

Your financial needs change as life progresses. Revisiting details of the plans can help ensure that it continues to achieve the intended objectives effectively and efficiently.

 

FAQs

1. Is it risky to invest in a Money Back Policy?

No, it is not risky to invest in a money back policy as it guarantees both survival benefits at regular intervals and fixed insured amount at the end of the term.

2. Is a money back policy better than a term insurance plan?

Yes, it’s a better option than term insurance. Money back insurance policy offers you benefits when you are alive, and even if you pass away. Term insurance and other life insurance plans don’t offer these benefits.

3. Can I get a loan against my money back policy?

Yes, it is possible to obtain a loan against your money back plan. This option is available with most insurance companies.

4. What are the tax benefits with Money Back Plans?
Insurance falls under tax exemptions. The money back plan can help you with tax relaxation. The insured amount is exempted from tax if the maturity amount is 10 times the annual premium.

Disclaimer:
This article is for informational purposes only and not financial, investment, tax, or legal advice. Policy terms may vary, so consult a qualified advisor before making decisions regarding the purchase of a Money Back Policy or any other financial product.