Pros and Cons of a Money-Back Plan
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Preparing for the future is not an easy task. You have to think about your family’s needs along with your financial coverage. And one of the most popular ways to achieve that is to buy a money-back plan.
A money-back plan ensures that the individual’s financial needs are being met along with providing them a life cover. But like any other life decision, you should know all the pros and cons of the topic before you invest yourself in it. It will give you a correct idea of what you are committing yourself to. And here, we will be discussing all the money-back plans in this article.
First off, what are money-back plans?
Money-back plans are the life insurance plans that give the benefit of an investment plan along with an insurance plan. In a money-back plan, the life insured gets regular monthly payouts in addition to insurance coverage for their life. The regular monthly payouts that the individual receives are called survival benefits. That means the life insured gets a reward from the insurance company for surviving.
In this plan, the individual purchases the plan by giving a lump sum amount of money and then starts receiving survival benefits after a few years. The benefits continue to come until the maturity of the policy and stop right after. In case the life insured gets into an unfortunate accident and dies, the insurance company gives the maturity amount to the nominee(s) regardless of the already paid survival amounts.
What are the pros of money-back plans?
The advantages that the money-back plan gives are:
1. Gives an insurance coverage
One of the perks of the money-back plan is that it gives life coverage to the individual. They can choose from the various options that will meet the financial needs of their family best. Then the plan will make sure that their family gets to live the same dignified life as they used to, even in the absence of the life insured.
2. Low-Risk Investment
Unlike the other forms of investment like mutual bonds, shares, and cryptocurrencies, money-back plans give individuals a chance to invest their money and take the risk factor out of it. It means that the rise or fall of the market will not affect the individual’s invested amount. They will get their guaranteed amount at regular intervals as specified in the insurance plan.
3. Tax benefits
Individuals can get tax benefits of up to Rs. 1.5 lakhs on their premiums paid in the money-back policy.
4. A waiver for the premium riders
If the individual has a premium rider on the insurance policy, then if he gets into some kind of unfortunate accident, then all the remaining premiums will be waived off. After the death of the life insured, the family members will not be required to pay the remaining premiums.
What are the cons of the money-back plans?
Although the money-back plans have a lot of advantages, they also have a few disadvantages related to them. Some of them are:
1. The premiums are expensive
Money-back plans deal with both the survival and death benefits. Thus, the risk associated with the insurance provider is high in this case. That’s why the premiums charged by these insurance plans are higher.
2. Accounting is complicated
Accounting for the money-back plans is complicated. Depending on the tenure of the offer, the individual might need to change the prior months’ revenue papers and cost sheets. It will compromise the individual’s ability to manage money properly.
Wrapping up
Money-back plans are the most sought-after insurance plans in India that provide insurance and investment benefits in the same plan. After a few years of buying the insurance plan, the individual will start receiving monthly payouts from this plan which will continue until the maturity date. Like every other financial plan, this plan also has some pros and cons that you should know before investing in it.
Also Read: Benefits Of Purchasing A Life Insurance Policy Online
