Money Back Policy: Concept, Working, Need & Benefits Explained

Have you been waiting to buy a perfect investment plan? Are you planning to invest in a money back policy? If so, know that it would be a must for you to know about it in detail before making the final call. 

What Is A Money Back Policy?

A money back policy is a category of life insurance policy that returns money-back at regular intervals. One of the best means to attain liquidity during the policy term, the policy pays money back during the plan tenure in the form of a percentage of the Sum Assured. It must be noted that money-back pay-outs are termed as Survival Benefits. 

How Do Money Back Policies Work?

Let us understand the working of a money back policy with the help of an example. 

For instance, Aman purchases a money back plan of Rs. 10 Lakh sum assured for a policy term of 25 years. He pays regular premiums throughout the policy duration. The plan promises to give survival benefits at 20% of the sum assured after a span of every 5 years while on plan maturity, 20% of the sum assured will be paid along with any accrued bonuses.

Aman gets Rs. 2 Lakh every 5 years. At the end of the 20th policy year, Aman has already got  Rs. 8 Lakh. When the policy matures, Rs. 2 Lakh in addition to the accrued bonuses would be paid to him. Thereafter, the policy will terminate. 

However, in case Aman dies on the 18th policy year, his nominee would receive Rs. 10 Lakh along with the added bonus despite Aman being given Rs. 6 Lakh as survival benefit. 

Why Do You Need a Money Back Policy?

Money back policies are savings plans that come across as a major source of funds on regular intervals after a specific period till the end of the policy term. In the changing times in the world of unpredictability, money back policies prove to be the reliable solution that does not let you or your loved ones financially suffer while you try to fulfill your life goals by providing survival benefits, resolving the issue of liquidity, and providing risk-free returns. 

Benefits Offered Under A Money Back Policy

A money back policy offers various benefits along with bonuses. While the benefits depend on the policyholder, the bonuses depend on the insurance company. Let us find out how by going through the list of benefits that includes:

1. Survival Benefits

The policyholder receives money from time to time in the form of the survival benefits. The survival benefits are given at regular intervals over the lifetime of the policy. The payment of survival benefits starts after a few years of the start of the policy. The payment continues until the policy gets matured. 

2. Death Benefits

The nominee of the policy receives the death benefit of the insured person. The death benefit is inclusive of the sum assured of the money back policy as well as bonus accumulated on the policy. However, the death benefit does not include the survival benefit. 

3. Maturity Benefit

The insured individual receives the maturity benefit on the maturity of the money back plan. The maturity benefit comprises the sum assured and the bonus that is based on the performance of the insurance company. 

Also read - Understanding the Difference Between Money Back Plans and Fixed Deposits

Should I exit From The Money Back Insurance Policy?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.