Explained: What are money back insurance policies?

For those who prefer liquidity for immediate life goals, there are money-back policies that provide a guaranteed amount to the customer in the form of a bonus if the customer continues to pay the stipulated premium at regular intervals. Additionally, these plans include a maturity amount payable after the policy period in addition to the risk cover.

Let’s understand with an example if you buy a money-back policy for a period of 20 years policy term, it will pay you a bonus amount regularly after the interval of a certain number of years and on maturity, the entire sum assured is paid along with accrued bonus. So, you will receive a bonus amount during the 5th, 10th, and 15th years of the policy. Further on maturity, you will also receive a maturity amount and bonus, if any.

What are its features?

This plan is beneficial for individuals who wish to earn regular pay-outs within the policy’s duration. These survival benefits can be utilised for your children’s education, marriage, investment for your business, or a dream family vacation.

-Money back plans provide different insurance term options based on the customer’s demands and objectives.

-Payouts are made at specified intervals throughout the policy’s duration and are expressed as a percentage of the sum assured. The number of survival payouts may vary depending on the policy term selected. For instance, 15-year insurance may provide three payouts, whereas a 25-year policy may provide five payouts.

-These plans give an average return of 5-6% and have high surrender charges if you exit the policy before the completion of the tenure of the policy.

– Additionally, as is the case with most insurance plans, the customer may qualify for tax exemption under section 80C if the risk coverage is ten times or greater than the annual premium paid.

-A policyholder who survives the period of the insurance receives the remaining corpus, along with any accrued benefits such as bonuses. If the insured dies during the period, his dependents receive the entire sum assured without any deductions for previously paid survival benefit amounts as money back components.

-That said, the bonus is based on the total amount assured. Money-back policies’ premiums are greater than those of other plans due to the guaranteed return benefit.