Myths About Money Back Plans You Should Avoid
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You have the option of investing in multiple saving plans from life insurers to fulfil both the investment and safety needs of your family. To use these saving plans effectively you need to have the correct information about them.
However, there are many popular myths about money back life insurance saving plans which may stop you from maximizing your benefits from them.
Money Back Policy Myths Busted
Five of these popular myths are explained below:
Myth1: Money Back Plans do not Provide Sufficient Life Cover
Savings plans are built to allow you a safe mode for achieving your financial goals. So, when you use a savings plan to achieve your financial goal, the plan protects the goal adequately. For example, you aim to build a corpus of Rs. 40 lakhs for your child’s higher education goal. If you use a savings plan to invest in, it may offer the following:
- Help you accumulate Rs. 40 lakhs with regular contributions
- Keep your corpus safe from market volatility
- Protect your child’s goal from the risk of your early demise
These benefits mean that your child has the assurance of achieving the level of higher education you have planned for her, even when you cannot be there.
Myth:2 Money Back Plans are only Tax-Saving Tools
Tax-saving could be a popular reason for investors’ choice. But tax-saving is one of the many benefits life insurance offers and not the primary benefit. Also, any savings plans meant to only save tax would perhaps not offer you substantial other benefits, such as:
- Life cover
- Guaranteed Bonus additions
- Wealth boosters
- Options to invest in different asset classes
- Automated portfolio management option
As a matter of fact, the best plans help you achieve your financial goal and at the same time increase the protective umbrella of life cover for your family.
Myth 3: Money Back Plans are Expensive to Invest in
Saving plans, especially online savings plans are almost inexpensive. First, to start investing you don’t have to be earning millions and have a great savings ratio. Even if you are on your first payroll getting about Rs. 20,000 and have a savings ratio of 10%.
Myth 4: Money Back Plans are for Wealthy Investors
This cannot be farther from the truth. Given the fact that most savings plans are safe investments, it makes more sense to use them when your risk appetite is low. This may happen in the following cases:
- Your income and earning potential is low
- You want to preserve your wealth for a specific purpose
In other words, when you have wealth, you will need savings plans to preserve wealth. Whereas, before you are wealthy, you need to use savings plans for building that wealth. Also, as mentioned in another point, you can start investing in a savings plan with just Rs. 1800 p.m.
Myth 5: Money Back Plans Offer No or Little Benefits
If nothing else, savings plans will still offer the following two benefits:
1. Added financial protection for your family in case of your early death
2. Safe option to invest in your family’s future goals
Conclusion
The best savings plans in India, however, will offer even more benefits. Before choosing the most suitable one for yourself, you should compare every money back policy out there. This will help you with even more knowledge about the plan that you're purchasing.
Also Read: Should I Invest In Money Market Funds Or Mutual Funds?
