Have you heard of a money back policy? It is a type of life insurance plan that is often offered to customers of varying ages. These plans come with both insurance coverage and savings parts. After you pay your premiums for a specific duration, in case you suddenly pass away within the policy tenure, then the nominees will receive the sum assured or death benefit payout accordingly. However, if you survive this duration, then you will be eligible to get a certain amount at maturity. Many customers prefer these policies since they can save money for the future and get life coverage at the same time.
How Do These Policies Actually Work?
A money back policy mostly offers payouts at regular/specific intervals to policyholders. Death benefits are also provided to beneficiaries in case of the policyholder’s sudden demise within the policy tenure. These plans may be relatively costlier than pure-term insurance coverage since there is an assured payout in any case.
Whenever you purchase any such policy, you should work out the life coverage amount carefully and choose to make premium payments either every month, quarter, or year. At the same time, in case you outlive the money back policy, the insurer will pay a prefixed amount at the time of maturity. This is mostly a major portion of the premiums that you have paid, and it may be paid regularly until the expiry of the policy.
Major Features and Benefits of Money Back Policies
Here are some of the key benefits and features of a money back policy that you should know about.
- Guaranteed Returns—You can get assured returns on the premiums you have paid. This will be paid in installments at intervals and will be part of the guaranteed sum, which will be paid in whole when the policy finishes.
- Periodic Payouts—Many of these policies have provisions for regular payouts throughout the policy period, with the remainder paid at maturity. Depending on the terms and conditions, they are a percentage of the total amount or a fixed sum.
- Survival Benefits—Several money back policies also have survival benefits that are paid to policyholders in case they survive the policy duration. These benefits are mostly a percentage of the sum assured amount and may also be paid in installments throughout the policy period.
- Maturity Benefits- The remaining sum assured will be paid in case of your expiry or the maturity of the policy. The payouts prior to this benefit will be deducted from the total figure.
- Death Benefits- In case of the policyholder’s demise within the policy period, the sum assured or death benefit will be paid to his/her nominees, irrespective of whether any payouts were made earlier or not.
- Tax Benefits- You will get tax deductions on premium payments under Section 80C up to Rs. 1.5 lakh.
Is it Right for You?
A money back policy may be right for you in case you are confident of surviving the policy period and want to use the guaranteed returns to achieve financial goals or make big-ticket purchases in the future. It may work well if you are young and are taking life insurance early on in life. At the same time, there is also a surrender value that you will get or a percentage of the premiums in case you wish to terminate the policy for any reason. You may even borrow loans against this surrender value in case you need money for any urgent requirements.
