Money-Back-Policy

money back policy

Money back policy 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. Here you can carefully research, compare and choose a suitable money back life insurance plan for your needs. Money back plans offer a true amalgam of insurance and investment. Secure your family financially. Money back plans are one of the most popular life insurance plans in India. Under these plans, the policyholders receive frequent payouts as the death benefit, in case the policyholder 

survives. These packages include both insurance and investment plans A money back plan is ideal for people who want a guaranteed return on their investments and are looking for regular payouts at the same time in addition to an insurance cover for themselves for the same money they are putting in as premium. Unlike a standard life insurance policy that only pays an amount after the maturity of the policy, the money back plan starts to pay an amount that is called a ‘survival benefit’ over the lifetime of the policy. This survival benefit is given after a few years from the start of the money back plan and continues until the maturity of the money back policy. The survival benefit, as the name suggests, is a reward from the company to the insured individual for surviving. This benefit is only payable if the insured is alive. In case of occurrence of an unfortunate event that results in the death of the insured party, these survival benefits do not accrue any more. In such cases, the nominee(s) receive the whole of the maturity amount, irrespective of how much survival benefits have been paid along with any bonus that may have accrued. Thus, the money back plan offers regular income along with a maturity benefit just like standard life insurance policies.

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Features of a Money Back Policy
  • Guaranteed Returns from a Money Back Plan
  • Income During the Lifetime of the Money Back Plan
  • Income on Maturity of the Money Back Plan
  • Income on the Death of the Insured Person in a Money Back Plan
  • Bonus Amounts Help Increase Payout in a Money Back Policy
  • Add on Riders Available for the Insured to Increase Their Cover

Example of Money Back Policy

Let’s assume that the money back policy is of a 20-year policy term and it starts paying survival benefits after 5 years and pays the same every 5 years, and the rest on maturity. In such cases, the insured party would receive a survival benefit in the 5th, 10th and 15th year of the policy and the remainder of the survival benefit at the time of maturity of the policy in the 20th year. This would be in addition to the maturity amount and any bonus, if any. These payments would help the insured individual to pay off major expenses along the way.

Suppose the policy was bought at a time when the child of the insured is around 10 years old. In such a case, the first survival benefit payment at the end of 5 years of the money back policy can be used to pay off the tuition fees if the child is preparing for engineering or medical tests and has taken coaching for the same.

The second payment of the survival benefit received when the child is 20 years old can be used to pay off any fees for post graduation studies. If a suitably large money back policy is taken, then this amount can be used to pay for even foreign education expenses.

The third survival benefit that accrues on the 15th year of taking the plan will be paid to the insured when the child is 25 years old. This amount can be used to pay for wedding expenses of the child. The fourth instalment of the survival benefit will accrue at the 20th year of the money back plan when the insured shall also receive the maturity amount and the revisionary bonus. This amount can be used to fund the retirement years or if the person has already covered himself or herself for retirement, then it can be used to buy a house or pay for an extended holiday. Buying a money back plan with an adequate cover will also mean that the amount received by the employee on maturity will be substantial and can be used to meet a myriad of large expenses. These may include unavoidable expenses like relocation expenses to move back to the hometown after retirement, renovation of the ancestral property, renovation or remodelling the existing house, paying off a car loan, and so on.

In most cases, the maturity amount is a lump sum amount and is paid to the policyholder at the maturity of the policy. The insured party can opt to receive annuities or regular payouts every quarter or every month. Most insurance companies or their financial experts can design policies that would suit the needs of the individual and ensure that they get a money back policy that best serves their future needs. If you are looking for a plan that helps you plan future expenses without you having to worry about the safety or the security of the money invested, then looking at a money back plan may make perfect sense for your needs.

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. 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.
  2. 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 2/22/2021 Money Back Policy- Compare Money Back Plans, Features & Reviews
    https://www.policybazaar.com/money-back-policy/ 2/5 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. If you are
    wondering why, it’s because the value of money decreases over time. This means that what Rs. 100 will buy you today, it will not do so 2-3 years down the line. Let’s try to clarify this further with an example. Suppose you are having a meal at a restaurant or watching a movie at a place where you are regular over the last 4-5 years. If you think back, you will remember that your favourite dish
    in the restaurant or the bag of popcorn you are munching on used to cost less two years back. It may have been Rs. 10-20 cheaper but it was definitely less costly than before. This means that if you are paying Rs. 100 now for the meal or popcorn, you probably paid Rs. 80,
    Rs. 90 or even less two years ago. Approaching it from a different perspective, what this means is that Rs. 80 or 90 is now no longer paying for the same amount of food as it used to two years ago. You will receive a lesser amount of food if you pay Rs. 80 or Rs. 90.This is
    commonly known as reducing value of money. Applying this logic to a money back policy of say 20 years means that the payout you receive in the fifth, tenth or fifteenth year (say) is worth more than if you have received it at the end of the policy tenure.
  3. Insured Receives the Full Sum Assured on Maturity: A money back plan provides the full sum assured on maturity. This is irrespective of the survival benefits and the amount paid under the same. This works just like any standard life insurance policy where the insured party gets a final assured sum at the end of the policy term. The money back policy is a good way to get more than just the maturity amount as in addition to it, the insured also keep receiving the survival benefits over the term of the policy. This is in addition to the bonus they receive at the end of the plan period. If you are contemplating whether to go for an endowment plan, a money back policy or a term plan, it may be best for you to understand what you are looking for. If you only want a cover and are fine with not receiving any money back at the end of the period, then the term plans may be best for you. If you are looking for a plan that only pays at the end of the policy period and you do not need any money back during the term of the policy, then the 2/22/2021 Money Back Policy- Compare Money Back Plans, Features & Reviews endowment plans work well. If you need a cover, sum assured at the end of the policy and
    returns after every few years, then the money back plans are what you should put your money in.
  4. 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. Most plans offer insurance benefits only and a limited return, while others like ULIP – Unit Linked Insurance Plans offer a smaller cover and larger (and riskier) market linked returns. In between these two options, money back plans provide an ideal platform for the risk adverse investor to get an insurance cover and also receive significant guaranteed returns.

What do You Need to Understand Before You Buy a Money Back Policy

A money back policy is one of the smarter ways to plan your life investment cover. You not only receive money back over frequent intervals of the policy tenure, a sum assured at the end of the policy term, bonus amounts as declared by the insurer but also an adequate insurance cover for the whole of the policy period. In addition, some companies provide the benefit of extending the cover over the whole life of the insured, subject to certain limitations. Buying a money back plan makes sense for an investor who is looking for a cover that gives him guaranteed returns and also returns at certain stages of life to pay for large expenses that may occur in the future. An individual must consider and understand a few things before they opt for a money back plan.

  • Understand What a Money Back Plan is: A money back policy is an endowment plan with guaranteed return options over the period of the policy. The maturity benefit of the money back plan may be slightly less than what an endowment plan offers. However, if you consider the money value terms of both the pure-play endowment plans and money back policies, you will realize that the latter might actually offer better returns, considering factors such as inflation and CPI/WPI. 
  • Understand What a Money Back Plan is Not: This is important as most people end up comparing a money back plan with a pure play investment option. A money back plan is an endowment life insurance policy that offers guaranteed returns after a few years of starting the plan in addition to the maturity value of the sum assured and the bonus, if any. Being an insurance policy, it also provides a cover for the whole amount of the sum assured in case the worst comes to pass and the insured does not survive the policy period. It is not a full-fledged investment option that will put your money in the securities market and get you good but risky returns. If you are looking for investment plans, then the best option would be to search for such products and not an insurance product.
  • Understand the Concept of Risk and Realize How a Money Back Policy can Help: Market investments are subject to risk and have high degrees of volatility. The best investment are those that balance the risks and the returns so that some of your investments are safe from the vagaries of the market. Experts agree that the best way to invest is to have a judicious mix of market investments with secure non-market linked ones that keep a part of your money safe. For such instances, customized endowment policies such as money back plans are the best as they provide safe and secure returns without you having to worry about your money.