Ignoring this investment scheme can be a mistake

Over time, investing in Fixed Deposits (FDs) allows you to accumulate an extensive corpus. But what can someone do if they need money before the insurance matures? This is where you may benefit from the best saving plan. As the name implies, a money back policy returns money in the form of recurring installments during the policy term established by the insurance firm. The life insured may get a lump sum payment at maturity. A money back policy aids in the resolution of the liquidity issue.

A money back policy is a form of life insurance plan that enables the insured to receive recurring returns or a lump payment at a specified time throughout the policy duration.

Money back policy‘s returns might be guaranteed, contingent on investment success, or a mix of the two. This enables you to choose a money-back coverage most suited to your specific financial objectives. Let’s take a closer look at how a money back policy works!

How Does A Money Back Policy Work?

A basic insurance plan pays out a lump sum payment to the policy’s nominee in the event of the life insured’s death. This is referred to as the life insurance death benefit.

On the other hand, a money back policy is the best saving plan in which the insured receives a part of the amount promised at regular intervals rather than a lump payment at the conclusion of the policy term. As a consequence, a money back policy is a liquid endowment program.

The sum received as payments is known as the ‘Survival Benefits.’ These are reimbursed during the policy period, and the remaining amount insured, together with any vested incentives, is paid at maturity.

Why Do You Need to Buy Money Back Policy?

Here are some reasons that make money back policy the best saving plan:

• A money back policy combines the advantages of an insurance policy with those of an investment, which means that the policy produces an income for the policyholder rather than just providing a lump amount in the case of their death.

• These plans provide a guaranteed return on investment, yearly payments, and insurance coverage, making them a good alternative for people looking for both security and money.

• Consequently, policyholders benefit from a consistent and guaranteed return on investment and the chance to grow their wealth via investment options.

• When you invest, many money back policies might be sensible depending on your life stage. Child money back policy, for example, may help you properly prepare for their future.

Features of Money Back Policy

Before you buy a money back policy, whether it’s a child money back plan or another sort of coverage, you should be aware of the following features:

1. Guaranteed Returns

After a specific time, money is repaid to the life insured as a survival reward. The money is guaranteed if the policyholder lives the insurance period. If the policyholder dies, the nominee gets the guaranteed amount and any accrued bonuses. This applies to the child money back policy as well.

2. Income During Policy Term

A money back policy guarantees that the insured will get returns or the amount guaranteed every few years. As a result, the survival value accumulates over time and provides policyholders with a secondary source of income.

These monies might be used to take a trip, save for an unforeseen event, put down a deposit on a home or apartment, or pay off the children’s school or tuition expenses. Consequently, money back policies outperform other forms of life insurance on the market.

3. Riders to Increase Cover

As the name indicates, most insurance companies provide optional add-on riders that the insured may add to their money back policy. These riders might be associated with medical situations such as life-threatening diseases, personal injuries, or term riders.

4. Bonus Amounts

The Money Back insurance even adds to the insured’s income as a bonus. The incentive is computed and accumulated each year as a percentage of the money guaranteed by the insurance provider. The accrued bonus is added to the total payment payable when the insurance matures, or the policyholder dies.

Benefits of Money Back Policy

Let’s take a look at some valuable benefits of a money back policy:

1. Survival Benefit

Money is given to the policyholder every few years for the insurance term. The payout starts a few years after the insurance is issued and continues until the policy matures.

Consider the following scenario: Akash has selected a money back policy that guarantees an amount of Rs. 5 lakhs over a 20-year period. He must pay a 20-year premium and will be paid a share of the money promised at regular intervals.

Depending on the policy conditions, he may get 15% of the total promised as a survival benefit after the 5th, 10th, and 15th years of the policy, which is 15 X 3 = 45 per cent of the sum assured. At maturity, he will also get the remaining 55% of the guaranteed sum, plus any bonus.

2. Death Benefit

The insurance nominee will get the death benefit in the case of an unfortunate incident. This covers both the cash promised and any bonuses accrued under the money back policy. This excludes the survival bonus, which is only given to the insured while they are still alive.

3. Maturity Benefit

When the money back policy matures, the insured person gets the maturity benefit, which consists of:

• Sum Assured: It is the complete cover amount that the insured selects at the start of the policy.

• Bonus: This includes the insurer’s declared reversionary benefits that have accumulated over time. This is largely determined by the company’s performance.

4. Tax Benefit

Section 80C of the Income Tax Act permits you to deduct up to Rs. 1,50,000 in life insurance premiums each year from your taxable income. Furthermore, Section 10(10)D exempts the money back policy’s maturity benefit from taxes.

Wrapping It Up

A money back policy is one of the best saving plans that provide liquidity in the form of periodical payments during the policy’s lifetime.

The maturity benefit is paid when the plan matures. It offers life insurance, and the Death Benefit is paid in full to the nominee in the event of the policyholder’s death, regardless of the survival benefits previously earned.

Because there are so many alternatives, the number of survival benefits and the intervals vary from policy to policy.