Money Back Policy - Buy Money Back Plans Online in 2024

If you are looking for one investment plan that provides both investment and life insurance benefits, the money back policy is the one you want to look at. It offers combined benefits of a life insurance plan and regular investment returns. 

In this article, we will share all about how you can invest into a money back plan easily. 

What is a Money Back Policy?

A money back policy is a type of investment plan by an insurance company. This investment plan pays you a predetermined percentage of the sum assured at regular intervals, also known as “survival benefits”. The survival benefits are paid out regardless of whether you are alive or not. 

Therefore, a money back insurance policy provides you with the dual benefits of life coverage and periodic pay-outs. You can use these payments to pay education bills, marriage, purchase a house, or meet your other financial goals. 

How Does a Money Back Policy Work?

A money back policy combines the benefits of an investment and insurance. You receive your payouts at regular intervals until the end of the policy term. Below is explained how a money back plan works:

• Premium Payment: To keep the policy active, you have to pay regular premiums. 
• Survival Benefits: You are paid a portion of the sum assured as survival benefit at predetermined intervals. These pay-outs are mostly a fixed percentage of the total sum. 
• Maturity Benefit: Once the policy term ends, you receive the remaining sum assured with any bonuses, if applicable. 
• Death Benefit: In case the policyholder dies during the policy term, the nominee on paper receives the full sum assured, even if the survival benefits are already paid. 

Since a Money Back Plan offers both insurance coverage and survival benefits, it provides financial security and liquidity to the policyholder. 

Why Do You Need To Buy a Money Back Policy?

A money back plan can be considered as one of the best investments in the market. Here’s why you should consider buying a money back plan:

• It is a two-in-one combination of insurance and investment which allows policyholders to benefit from regular income and death benefits within the same plan.
• Policyholders receive guaranteed returns. 
• You can choose various types of money back plans, depending on the benefits you want to avail. 

Features of Money Back Policy

Here are the key features of the money back policy:

• Life Cover: The money back plan provides a financial cover to your loved ones in case of your death during the policy term. 
• Regular Pay-outs: Based on a percentage of the sum assured, you receive periodic payments at regular intervals. 
• Riders: It's possible to customize your policy with additional riders for benefits like accidental death coverage, severe illness cover, or a waiver of premium payment in case of disability. 
• Flexibility: There are various payment options for investors, including limited payment which allow for shorter durations with extended benefits. 
• Save for Goals: One can plan for anything such as a house down payment or their child's education. 
• Guaranteed Returns: It provides assured pay-outs and returns regardless of the market fluctuations. 
• Financial Security: Benefits of a life insurance and maturity lump sum pay-out provide comprehensive financial security. 
• Tax Benefits: Premiums are eligible to avail tax benefits under Section 80C. Additionally, maturity and death benefits are tax-exempt under Section 10(10D) of the Income Tax Act. 

Benefits of Money Back Policy

Money back policies of a combination of features and benefits to policyholders. There are some of the key benefits:

1. Annual Profits

These plans share a percentage of the investment profits with the policyholder every year. Thus, it increases the total payout over time and can help cope with inflation. 

2. Terminal Bonus at Maturity

At the end of the policy term, the insurance company may offer you an additional bonus along with your maturity benefit, depending on how long you have been enrolled and the plan's performance. 

3. Maturity Benefit

If you stay till the end of the term, you will receive a lump sum payout regardless of the market conditions. 

4. Steady Income

Money back plans offer regular payouts throughout the policy term, creating a new source of extra income for policyholders. 

5. Security Through Death Benefit

In case of an unfortunate incident, the nominee will receive the sum assured in the policy to provide financial security. 

6. Tax Benefits

The premium the policyholders pay towards the money back plan are deductible under Section 80C up to ₹1.5 lakhs. The maturity amount that you received at the policy's term end is generally tax-free under Section 10 (10D) of the Income Tax Act, 1961.

Eligibility Criteria for Buying a Money Back Policy

Here is the eligibility criteria to apply for a money back plan:

1. The age of the individual should be a minimum of 18 years and a maximum between 55 to 65 years. However, the age bracket may vary depending on the insurance company.

2. The individual must have a stable income flow and should be able to pay premiums on time.

3. The policy term can range from anywhere between 10 to 25 years. 

Things to Know Before Buying a Money Back Policy

Here are some things to consider before buying a money back policy:

• Know the Features: Make sure to go through all the features of the money back policy and understand them thoroughly. 
• Premiums: Choose the premium amount to be paid in a way that it shouldn’t financial burden you. Additionally, check if there are any flexible plans available. 
• Evaluate the Returns: After determining the premiums, consider the returns that you will receive as a money back. 
• Sum Assured:

Sum assured is the amount paid to the nominee in case of demise of the policyholder. Thus, it’s a crucial aspect to check to before buying a money back plan.

• Additional Benefits:

Other perks such as bonuses and riders are lucrative additions. Therefore, check the riders that you are allowed to add to your base policy. 

Fixed Deposit (FD) VS Money Back Policy

Here is a quick comparison between a Fixed Deposit (FD) and a money back plan:

FAQs

1. Is it risky to invest in a money back policy?

Money back policies carry a low risk rate as they aren’t market-linked investments. 

2. Is there a penalty if I do not pay my premium for the money back policy on time?

It depends on your insurer and the type of money back plan. In most cases, you may have to pay a penalty or interest with the premium after the grace period.

3. Who is most suitable to buy a money back policy?

Money back plans can be the most suitable for those wanting a financial cover and investment returns at the same time. 

A money back plan may be suitable for you if:

• You want a regular income
• You are saving for a specific long-term goal
• You want financial protection for your family

4. What are the riders available in a money back policy?

Here are the 5 riders available in money back plans:

• Critical Illness Rider: This rider provides a lump sum benefit if the policyholder gets diagnosed with a critical illness such as cancer or heart attack.
• Accidental Death or Disability Rider: This ride provides a lump sum benefit if the policyholder dies or get disabled in an accident.
• Waiver of Premium Rider: This rider allows the policyholder to waive their premiums in case they become terminally ill or disabled. 
• Term Rider: This rider allows the policyholder to add a term life insurance plan to their money back plan.
• Hospital Cash Rider: This rider offers a daily cash benefit if the policyholder gets hospitalized.

5. Can I revive my money back policy?

Yes, you can revive your money back policy. However, you may have to bear policy preparation charges and stamp fee. 

6. How do I surrender my money back policy?

Follow the steps below to surrender your money back policy:

1. Inform your policy provider that you want to cancel your money back policy with a reason. 

2. Determine your policy’s surrender value.

3. Fill the surrender form.

4. Submit the required documents.

Then, wait until your request is approved. 

7. How frequently am I required to pay the premium for a money back policy?

The premium payment frequency depends on your money back plan and insurer. There are 4 premium payment frequencies: monthly, quarterly, half-yearly, and annually. Here, monthly is the most common premium payment frequency. 

8. What happens if I fail to pay my money back policy premium on time?

These are the following scenarios that may happen if you fail to pay your premiums on time:

• You may be granted a grace period to pay your premium.
• The policy may relapse if you fail to pay the premiums within the grace period.
• Depending on your policy, you may get the option to revive your policy.
• In some cases, your money back plan benefits might get reduced.

9. Is a money back policy a good investment?

A money back policy is a good investment choice as it can provide you regular pay-outs throughout the policy tenure. Additionally, it offers the benefits of a life insurance plan.

10. How do I transfer my money back policy?

It is not possible to transfer your money back policy.

11. How are returns calculated on your money back policies?

The returns on money back policies are calculated based on the premiums, the tenure of the policy, and sum assured. 

12. Is money back policy taxable?

The guaranteed pay-outs, bonuses, and death benefits are all tax-free for the policyholder.