Money back policy benefits have made the money back plan a hit in the eyes of the public. When it comes to buying life insurance policies, a money back policy is on the list of most Indians. And for a good reason: a money back insurance policy offers dual benefits of life cover and cashback at periodic intervals.
When building your financial portfolio, the first bastion to cover is traditional life insurance policies that offer you life coverage and the reassurance that your family will be cared for when you are not around. Traditional life insurance policies help inculcate a strong saving habit and create a guaranteed corpus over a long tenure.
Problems arise when you need an influx of funds before the tenure is done. Pulling your money out by surrendering the policy or borrowing against it are solutions, but not advisable. By surrendering your policy, you lose life cover and monetary value. You may avail of a loan against the policy, but it is likely limited to a certain amount. At this juncture, money back policy benefits would help you tide over circumstances without breaking your insurance policy.
How does a money back policy work?
With a money back plan, you do not need to wait till the tenure is over to use the money you have been saving. By paying lumpsum benefits at intervals during the course of the money back plan, such a policy solves your need for liquidity while ensuring that your life is covered throughout the tenure. In the simplest terms, a money back policy is an insurance plan that gives your money back to you at regular intervals. The periodic amounts you receive as money back policy benefits are a percentage of the sum assured listed in the money back policy.
A fixed percentage of the sum assured is released to you every few years as a survival benefit. This fixed percentage is also of Annualized Premium in new age policies. The remaining portion of the money back policy sum assured and any vested bonuses are paid to the policyholder at maturity.
However, suppose the policyholder dies during the tenure. In that case, the entire sum assured is paid to the nominee, irrespective of how many money back policy benefits have been reaped in the years gone by. So, even if you have already received percentages of the sum assured as survival benefits from the money back plan, the death benefit paid out to the nominee is the entire sum assured.
Typically, a money back insurance policy has cashback points that are spaced apart every 4-5 years. Though the exact percentage amount returned to you differs based on policy and insurer, a standard money back insurance policy pays out 20% of the sum assured in chunks throughout the tenure, and the remaining amount with accumulated bonuses at the time of policy maturity.
Reasons to buy a money back policy
To understand why you should buy a money back policy, it is essential to know how a money back plan is uniquely situated to help you compared to traditional life insurance policies.
A term plan or pure protection plan provides life cover in exchange for annual premiums. In case of your demise during the tenure of the policy, your nominee stands to receive a substantial corpus of funds as a death benefit in the policy. A term plan is a must-have life insurance product because you can avail of a significant life cover at affordably low premium rates. However, if you survive till the end of the policy term, a term plan does not offer any survival benefits.
A money back insurance policy serves a different need. A money back plan is a type of endowment plan that offers survival benefits. Instead of providing the survival benefits and bonuses at the end of the policy tenure, a money back plan pays these benefits at periodic intervals, thereby ensuring that your money makes its way back to you when you need it the most.
To meet financial milestones
The journey of life is dotted with many milestones—your first job, marriage, the birth of a child, purchasing your first home, paying for higher education for your children, retirement planning, and so on. Many of these milestones require the influx of money. With regular pay-outs from a money back insurance plan, you can bank on getting this influx when you need it the most.
When you buy a money back plan, you may also get the flexibility to choose when and how much of the sum assured you would like to receive. For instance, you could choose to get 15% of the sum assured back after 5 years or premium payments, 20% in another 5 years, and the rest of the sum assured and bonuses at maturity of the money back plan.
To earn risk-free returns
If the word ‘guaranteed’ sounds like music to your ears, you are not alone. The guaranteed risk-free returns offered by a money back plan is one of the main draws of such a policy. As compared to other financial products that are linked to the volatility of the market, a money back policy is a non-linked plan with fixed and guaranteed pay-outs.
To avail of regular liquidity
Whenever you put money in any savings plan, one of the factors to consider is liquidity. What happens if you require a part of the money you have saved? With traditional insurance plans, surrender and loan against policy are the only options you have. With a money back insurance policy, you can plan your finances better knowing that the periodic cashback will add liquid funds to your account at critical junctures. As such, a money back policy becomes a source of regular income paid out as survival benefits.
To earn bonuses
A money back plan offers certain benefits. These money back policy benefits include periodic percentage pay-out of sum assured as survival benefits, and participating bonuses (if announced). Bonuses such as a simple reversionary bonus and the terminal bonus are calculated on the entire sum assured and not the reduced amount after periodic pay-outs.
To plan your financial future
If you know when you will be receiving an influx of money from your investments, you can use that information to reverse engineer your financial future. For instance, you know that 10 years from now, your child will require funds for higher education. Choose a money back insurance policy that offers a cashback payment around the time you know you will need it. You can bank on the guaranteed sum assured pay-outs to be made to you in the future.
To protect your life
A money back insurance policy, at its heart, is a life insurance policy that protects the financial wellbeing of your loved ones in your absence. This low-risk savings option offers myriad money back policy benefits through the tenure of the money back plan as well as the reassurance that your life is covered for the duration. You can also choose to add riders to your money back plan to maximise its effectiveness.
IndiaFirst Life Insurance offers plans with a plethora of money back policy benefits, such as IndiaFirst Life Cash Back Plan with guaranteed pay-outs at regular intervals, assured maturity pay-out, the benefits of long-term investment with limited premium payments, and tax benefits under prevailing tax laws; IndiaFirst Life Mahajeevan Plus Plan which assures pay-out thrice during the premium payment term, an assured pay-out at maturity, life cover for a long term and bonuses to uplift your savings; IndiaFirst Life Smart Pay Plan with option of shortest possible pay term, a guaranteed pay-out during the premium payment term, assured maturity pay-out, the benefits of long-term investment with limited premium payments, and tax benefits under prevailing tax laws. A money back policy from a reputed insurer is a valuable tool to help you meet your financial needs today, tomorrow, and years in the future.
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