Many a people get confused between a Money Back Policy and a Term Plan Insurance, whereas in actual they both differ from each other in terms of basic features, maturity benefits, premiums, returns, etc. A Money Back Policy is a kind of life insurance providing the dual benefit, i.e., investment and protection. It allows you to receive returns at a regular interval of time during the tenure of the policy, and provides a life coverage offering financial protection in the case of an unfortunate incident.
In Money Back Policy, a certain amount or percentage of sum assured is paid back to the policyholder at a regular span of time. If in case the policyholder survives throughout the policy tenure, he/ she will get the remaining amount of sum assured. And, if the policyholder dies during the policy tenure, the full amount of sum assured is paid back to the nominee, irrespective of the fact that the survival benefits have already been paid.
Features of Money Back Policy
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Survival Benefits
These are the payouts made on periodic bases throughout the policy tenure, which are usually a fixed percentage of the sum assured.
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Death Benefits
In the case of an unfortunate death of the policyholder during the policy tenure, the nominee receives the full amount of sum assured. This amount is received irrespective of the fact that survival benefits have already been granted.
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Maturity Benefits
If in case the policyholder survives throughout the policy tenure, he/ she will receive the remaining amount of sum assured (once the survival benefits are deducted), along with the amount of bonuses or additional benefits, if any.
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Bonus
There may be some instances of accumulated bonus, which may be the share of profits earned by the insurance companies. These get added to the total payouts that are to be received by the policyholder.
Benefits of Money Back Policy
The benefits of Money Back Policy are as mentioned below:
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Periodic Returns
Under this plan, one will receive payouts periodically as a regular source of income i.e. at a regular intervals, helps to manage the short term financial goals.
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Life Coverage
This plan offers life coverage, further providing financial security to the family members of the policyholder in an event of his/ her unfortunate demise.
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Maturity Benefits
If in case the policyholder survives throughout the policy tenure, he/ she will receive the remaining amount of sum assured along with the accrued amount of bonus.
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Tax Benefits
Get tax benefits on the amount of premium paid or benefits received, if any u/s 80C and 10(10D) of Income Tax Act, 1961.
Who Should Buy Money Back Plan?
Mentioned are the individuals who should opt for Money Back Policy:
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Young Families
It will ensure financial security for the young family members in an event of unexpected circumstances.
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Savers and Investors
It is meant for those who seek guaranteed returns along with added life benefits.
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Risk Averse Individuals
It is for those individuals who prefer low risk investment having assured returns.
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Retirees
It is also meant for retirees who seek a steady source of income without any market related fluctuations.
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Long Term Planners
It is meant to meet the long term financial goals along with savings.
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Tax Savers
Also, get tax benefits under respective sections of Income Tax Act, 1961.
Factors to Be Considered Before Buying a Money Back Insurance Policy
Mentioned are the factors that should be considered before buying a money back insurance policy:
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Financial Goals
One should be clear about the requirements from the plan, firstly be clear about the financial goals in terms of regular income, savings, life cover, or a combination of these. Knowing your financial goals will help you get an ideal plan.
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Coverage
One should be well known about the amount of coverage required depending upon the expenses, liabilities, income, and financial goals, etc.
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Policy Tenure
Opt for a policy that well aligns with the financial objectives that you want to achieve.
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Premium Amount
The premium amount should be under your budget and affordable, which means it should not strain all your savings.
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Survival Benefit Payouts
The survival benefit payout should be granted at the time when funds are required the most.
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Reputation
Make yourself aware about the company’s claim settlement ratio, reputation, service, etc. Higher the claim settlement ratio, higher are the chances of getting claim settled successfully.
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Features and Benefits of Policy
Get aware of the features, benefits, inclusions, exclusions, terms and conditions of the policy that is to be bought.
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Riders
You can also consider the additional riders, such as accidental death, critical illness, disability benefit, etc. which help enhancing the coverage.
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Surrender Value
Get to know the amount of surrender value, i.e. the amount which will be received if you exit the policy before maturity date.
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Tax Benefits
Understand the tax benefits associated to make better evaluation of the plan. Under money back policy, the tax benefits can be availed u/s 80C, 10(10D), of the Income Tax Act, 1961.
Different Methods to Buy a Money Back Policy
Mentioned are the different methods to buy a money back policy:
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Online Method
Most of the insurance provider companies provides an option to purchase the money back policies online i.e. directly from their website. It includes filling out the application form, deciding the amount of sum assured, tenure of policy, and payment term of premium, and thus making payments online.
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Offline Method
You can also approach the insurance companies offices and consult an insurance agent or broker to get guidance from the, and help you understand through the terms and conditions of the policy.
Conclusion
Tough there are many investment options available, but every option has its own pros and cons. Your selection should be based upon the financial goals, investment criteria, and risk tolerance. You may also consult a financial advisor to get a personalized advice depending on the needs.
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