How Can I Get a Money-Back Policy?
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A money back policy is a type of life insurance product that provides the dual benefit of investment and protection. With a money back policy, you can receive returns at regular intervals during the policy term. A money back policy also provides a life cover that keeps your loved ones financially protected in case of an unfortunate event.
How Does A Money Back Policy Work?
Here’s an example to understand how a money back policy works:
Suppose you purchase a money back policy, you will receive a regular income right after the end of the premium payment term. The guaranteed cash benefit can be received monthly or yearly, as per your requirements
At the end of the policy term, you will receive a guaranteed amount along with bonuses
The life cover in a money back policy will provide your loved ones with a lump sum amount in case of an unfortunate event
Benefits Of A Money Back Policy
Accumulated returns:
Once the policy term ends, you receive a guaranteed amount as maturity benefit. This can be used to fulfil your financial goals like buying a house, child’s education, retirement goals, and much more
Added bonus:
You receive higher returns in the form of bonuses, such as a reversionary bonus, or terminal bonus that are added to your policy over time
Secondary source of income:
A money back policy offers a regular income. You start receiving this income either monthly or yearly, right after your premium payment term ends. It offers a continuous stream of money at regular intervals which can act as a secondary source of income
Life cover:
Along with the investment, the life cover offered in the plan provides financial security to your loved ones in case of an unfavourable event
Tax benefits:
A money back policy is primarily a life insurance plan. Hence, the premium paid is tax-exempt~ up to ₹ 1.5 lakh annually under Section 80C of the Income Tax Act of 1961. The benefits received are also tax-free~ under Section 10(10D) of the Income Tax Act of 1961
Things to know before buying a money back policy
Understand the features:
Understand how a money back policy works so you can fully benefit from investing in such a plan. It helps to get a clear view of the plan you wish to invest in, including the kind of bonuses the company offers, the maximum and minimum life cover available under the plan, the credibility of the insurer, rate of return, among other things
Stay informed of the exclusions:
A money back policy may not offer riders, such as critical illness cover, personal accident cover, or any such add-ons. Make sure you check the exclusions before purchasing a policy
Conclusion
A money back policy offers life cover to the person who purchases it i.e. a person pays certain amounts of money consistently towards a policy so that his/her family member, known as the beneficiary, is given the sum of money promised when the policyholder expires.
Also read: Pros Of Buying Money-back Plans
