Money back plans protect a person’s family's financial interests from circumstances such as death or critical illness of the policyholder. This plan is good 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. This is different from 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 every few years from the start of the money back plan and it continues till the time of maturity of the 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.
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 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.
The thing to remember for people is that it is an insurance cover (one that pays back money 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.
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.
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.
A money back policy is a good way to plan secure investments. Since the returns are guaranteed, they make an ideal investment vehicle and ensure the investor gets his or her money back in a worry free manner. If used in tandem with stock market investments, like mutual funds, a money back policy can help reduce the risks of the investor’s overall portfolio.
Policyholders can reduce their tax liability by opting for a money back plan. Moreover, the maturity amount is exempt from tax deduction at source as long as the sum assured is more than five times the premium paid for the policies. People who are looking for safe guaranteed returns can use this tax benefit to further increase their money as they will now also save on tax in addition to getting the survival benefits, sum assured on maturity as well the bonus from the insurance company.