A money back policy is a unique and attractive option that combines the benefits of insurance coverage with periodic returns. This type of policy is particularly popular among those who seek both protection and liquidity during the policy term. For Indian audiences, understanding the concept and benefits of a money back policy can help in making informed financial decisions that ensure both security and financial growth.
What is a money back policy and give an example?
A money back policy is a type of life insurance plan that provides regular payouts during the policy term along with a lump sum amount at maturity. Unlike traditional life insurance policies where the benefits are paid only upon the policyholder's death or at the end of the policy term, money back plans offer periodic payouts, known as survival benefits, throughout the policy term. These payouts are a percentage of the sum assured and are typically paid at regular intervals.
For example, consider a money back plan with a policy term of 20 years and a sum assured of Rs. 10 lakh. The policy might be structured to pay 20% of the sum assured at the end of every five years (i.e., Rs. 2 lakh at the end of 5th, 10th, and 15th years). The remaining sum assured (i.e., Rs. 4 lakh) along with any accrued bonuses is paid at the end of the 20-year term. In case of the policyholder's demise during the policy term, the full sum assured along with bonuses is paid to the nominee, irrespective of the survival benefits already paid.
Why should one opt for a money back policy?
Following are the reasons why one may opt for a money back policy:
Regular income:
Money back policies provide regular payouts, which can be used to meet recurring financial needs or invest in other opportunities.
Financial security:
These plans ensure that your loved ones are financially protected in the event of your untimely demise, providing a safety net for your family.
Dual benefits:
Combining the benefits of insurance and investment, money back policies offer both life cover and returns on investment, making them a versatile financial tool.
Risk management:
By providing periodic returns, money back plans help in managing financial risks and ensuring liquidity at various stages of life.
Key features of a money back policy
Following are the key features of a money back policy:
Survival benefits:
Periodic payouts are made during the policy term, which are a percentage of the sum assured.
Death cover:
In case of the policyholder's death, the full sum assured along with bonuses is paid to the nominee, ensuring financial security.
Maturity benefit:
At the end of the policy term, the remaining sum assured, and accrued bonuses are paid out.
Bonuses:
Many money back policies are participating plans, which means they are eligible to receive bonuses declared by the insurance company.
Flexible premium payment:
Premiums can be paid annually, semi-annually, quarterly, or monthly, providing flexibility to policyholders.
Key benefits of a money back policy
Following are the key benefits of a money back policy:
Guaranteed returns:
Money back policies offer guaranteed returns in the form of survival benefits, ensuring periodic liquidity.
Insurance coverage:
These plans provide life insurance coverage, protecting the financial future of your family in case of your untimely demise.
Tax benefits:
Premiums paid towards money back policies are eligible for tax deductions under Section 80C of the Income Tax Act. The maturity benefits are also tax-free under Section 10(10D).
Financial planning:
Money back policies aid in systematic financial planning by providing periodic payouts that can be aligned with major life events such as children's education, marriage, or purchasing a house.
Wealth accumulation:
These policies help in accumulating wealth over time with the combination of guaranteed returns and bonuses.
Eligibility criteria to apply for a money back policy
Following are the eligibility criteria to get a money back policy:
Age:
Most money back policies are available for individuals aged between 18 and 55 years. However, the exact age criteria may vary from one insurance provider to another.
Income:
There is usually no specific income criterion, but the policyholder should be able to pay the premiums regularly.
Medical examination:
Depending on the sum assured and the age of the applicant, a medical examination may be required to assess the health and insurability of the applicant.
Occupation:
There are generally no occupation-related restrictions, making these policies accessible to a wide range of individuals.
Documents required to apply for a money back policy
Following are the documents required to apply for a money back policy:
Identity proof:
Documents such as Aadhaar card, PAN card, passport, or voter ID card.
Address proof:
Documents such as utility bills, ration card, passport, or Aadhaar card.
Income proof:
Salary slips, bank statements, or income tax returns.
Age proof:
Birth certificate, school leaving certificate, or passport.
Medical reports:
If required, recent medical examination reports.
Is there a child money back policy and what is it?
Yes, there are child money back policies specifically designed to secure the financial future of children. These policies provide periodic payouts at key milestones in a child's life, such as education, marriage, or starting a career. Child money back policies ensure that funds are available when they are needed the most, helping parents plan for their child's future without financial stress.
For example, a child money back plan with a policy term of 20 years might offer payouts at the end of the 5th, 10th, 15th, and 20th years. These payouts can be aligned with significant educational milestones or other important events in the child's life. In case of the parent's death during the policy term, the policy continues, and the benefits are paid as planned, ensuring the child's financial security.
Conclusion
A money back policy is an excellent financial instrument for those looking to combine insurance protection with regular returns. With its unique structure of periodic payouts, life cover, and maturity benefits, it caters to the diverse financial needs of policyholders. Whether you are planning for major life events, seeking a secure investment, or ensuring financial protection for your family, a money back plan can be an ideal choice.
When choosing a money back policy, it is essential to compare various plans and select the one that best suits your financial goals and needs. Consider factors such as the sum assured, policy term, premium amount, and additional benefits before making a decision. With the right money back policy, you can achieve financial stability and peace of mind, knowing that you and your loved ones are well-protected, and your financial future is secure.
