A Money Back Policy is a type of life insurance which offers the dual benefit of both investment & protection. It allows you to receive returns at regular intervals throughout the policy tenure, & provides life coverage offering financial protection in the case of an unfortunate incident. It is a kind of life insurance plan that includes paying a certain specific percentage of the sum assured periodically. This plan best suits those individuals looking for short-term investment options, financial security, & regular payments.
Under this plan, a certain amount or percentage of the sum assured is paid back to the policyholder at regular intervals. If the policyholder survives throughout the policy tenure, they will get the remaining amount of the sum assured. On the contrary, if the policyholder dies during the policy tenure, the full amount of the sum assured is repaid to the nominee, irrespective of the fact that the survival benefits have already been paid.
Who Should Buy a Money Back Plan?
Mentioned are the individuals who should opt for a Money Back Plan:
- Young Families
It will ensure financial security for the young family members in the event of unexpected circumstances.
- Savers & Investors
It is meant for those who seek guaranteed returns along with added life benefits.
- Risk Averse Individuals
It is for those individuals who prefer low risk investment having assured returns.
- Retirees
It is also meant for retirees who seek a steady source of income without any market related fluctuations.
- Long Term Planners
It is meant to meet the long term financial goals along with savings.
- Tax Savers
Also, get tax benefits under respective sections of the Income Tax Act, 1961.
Reasons to Choose a Money Back Plan
Provided are the reasons to choose a Money Back Policy:
- Assured Returns
This plan best suits risk-averse investors, which offers assured returns irrespective of market situations. The policyholder receives the survival benefits if he survives, else nominee will receive the sum assured in case of the policyholder’s sudden demise.
- Income for Lifetime
This plan offers a guaranteed source of income throughout life, which includes the receipt of survival benefits periodically. This amount helps you meet expenditures, such as repayment of loans, vacations, buying a house, etc.
- Income on Maturity
This policy entitles the receipt of an assured lump sum amount at the time of maturity, along with the sum insured.
- Income on the Death of the Insured Person
In case of the policyholder’s death, this plan entitles the nominees to receive the sum assured along with the bonus, providing them with financial security.
- Bonus Amounts Help Increase Payout
This plan entitles the policyholder to receive the bonus, which is calculated as a certain specified percentage of the sum assured, further increasing the amount to be received at the time of maturity.
- Additional Riders
This plan allows for the addition of some additional riders, such as accidental riders, critical illness riders, etc., which will help enhance the plan at some added cost.
Difference between Fixed Deposit & Money Back Policy
Provided are the differences between a fixed deposit & a money-back policy:
| Basis of Difference | Fixed Deposit | Money Back Policy |
| Nature of Product | It is a pure investment plan, which means no insurance component is included. | This plan includes both insurance & a savings component. |
| Returns | Offers fixed returns at a pre-decided interest rate | Survival benefits periodically & a bonus in case of a declaration. |
| Risk | As these are not linked to market securities, hence offer less risk. | This includes low to moderate risk. |
| Liquidity | It attracts a penalty for premature withdrawals. | It provides payouts periodically, along with a loan facility |
| Tax Benefits | Deduction of tax u/s 80C can be availed only in case of tax-savings fixed deposits, where interest earned thereon is taxable. | The premium paid towards the plan is eligible for a tax deduction u/s 80C, & the maturity proceeds are also exempt from tax u/s 10(10D). |
| Maturity Benefit | It provides the principal amount along with interest at the time of maturity | It provides you with a balanced amount of sum assured & accumulated bonuses, if any |
| Objective | It helps in the short-term creation of wealth, along with savings | It assures long-term creation of wealth, financial protection, & income on a periodic basis |
| Suitability | Best suits risk-averse investors | Best suits those looking for an insurance along with liquidity & assured returns |
Benefits of Money Back Policy in Retirement Planning
While looking for the Best Retirement Plan in India, a money-back plan can also be considered to offer many benefits, serving as a retirement plan. Let’s check out the benefits it offers in retirement planning:
- Regular Income During Policy Term
This plan includes receipt of periodic payouts providing a regular source of income, which helps inculcate the habit of disciplined savings, ensuring long-term financial planning.
- Financial Cushion Post-Retirement
Besides a pension, you are also in receipt of survival benefits & a maturity benefit, further leading to long-term financial planning.
- Low-Risk Investment Option
This plan best suits risk-averse investors, i.e. who are reluctant to accept risks & assured returns during retirement years.
- Insurance Protection with Returns
This plan includes the dual benefit of life coverage & financial benefits. This means that in case of the sudden demise of the policyholder, the nominees will get the sum assured amount. Also, it entitles you to receive the survival benefits & maturity benefits, acting as a savings plan.
- Tax Benefits
The premium paid towards the plan is eligible for a tax deduction u/s 80C, & the maturity proceeds are also exempt from tax u/s 10(10D).
- Helps Meet Milestone Goals
These periodic payments help to meet the future financial objectives, such as child education, renovating the house, etc.
Conclusion
Choosing an appropriate retirement plan depends upon your future financial objectives, investment horizon, & risk tolerance level. One may also consult a financial advisor to seek personalised advice depending on the requirements. In cases of short-term financial requirements, one may consider a money-back policy, which can be helpful in meeting routine expenses, loan repayments, & rent payments, offering a regular stream of income.
**’The opinions expressed in the article are solely the author’s and don’t reflect the opinions or beliefs of the portal’**
