Traditional insurance, Money Back, plan pays out the same maturity benefits in the form of several guaranteed “survival benefits” which are staggered evenly throughout the course of the policy. The Plan is with the benefit of regular liquidity as the beneficiary gets payback on a regular basis. Not only this, but it also pays out a lump Sum Assured in the event of the death of the life insured. The beneficiaries/dependents/nominees of the life insured receive a benefit (called a death benefit) if the worst should come to pass for the insurance holder. In the event the insured individual does not survive till the policy maturation, the nominee would receive the Death Benefit (the entire Sum Assured) and the policy would be terminated. Functioning of Buy Money back Policy A money-back policy provides periodic pay-outs, ensuring a steady source of income to help policyholders meet expenses at different stages during the policy duration.
Money-back policies provide the benefits of an insurance policy as well as an investment, ensuring that the policy earns the policyholder an income instead of just merely providing a lump sum in case of his/her demise. An average money-back policy with 20-year tenure would thus pay the policyholder what is known as a ‘Survival Benefit’ a few years after the start of the policy. Around 20% of the Sum Assured would be paid out periodically, while the balance would be paid out at the time of policy maturity with a bonus if any.
How to Choose a Money-Back Policy
Choosing the right money-back policy is key to ensuring individuals receive the maximum benefits from a particular policy.
When choosing a money-back plan, individuals should look at the policy tenure. The average tenure for a money-back policy is around 20 years. However, the period should be decided based on the cash flow interval your desire and the tenure matching the goal of your life.
As money-back policies pay policyholders a Survival Benefit, prospective policyholders should ascertain the percentage of the Sum Assured that will be paid out in installments. The amount should be enough to cover any expenses the policyholder might have.
The type of investments available through the investment component of the policy should be looked over. Policyholders should also verify the duration of the pay-outs being made over the course of the policy term as Survival Benefits. Some plans pay policyholders every 5 years; others have a different timeline depending on the policy tenure.
Policyholders should also check to see if the money-back policy offers tax benefits. Some plans do not offer a tax benefit if 20% of the Sum Assured is being provided as Survival Benefit.
Money Back Policy Riders
Money-back policies provide policyholders with the option to add a cover that is not included in the original policy document in the form of riders. These riders cover additional possibilities such as accidental death, hospitalization expenses, permanent disability, and critical illness to name a few.
The riders provided along with a money-back policy differ from insurer to insurer and also depend on other variables such as the policy tenure.
General lists of riders that can be purchased along with a money-back policy are given below:
Accidental Death Rider: This rider provides coverage in case the policyholder meets with an accidental death as outlined in the rider guidelines. In such a scenario, the policyholder’s beneficiaries/nominees will receive a lump sum as an additional benefit.
Term Rider: This rider provides the policyholder with a waiver from paying the premium amount under certain circumstances but still provides coverage to the policyholder.
Critical Illness Rider: This rider provides the policyholder with financial assistance in the event he/she contracts a critical illness as defined by the rider.