Pros Of Buying Money-back Plan
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Money Back Insurance Policy is different from endowment plan as the policyholder gets a fixed sum at particular intervals during the policy period.
Example: Someone opts for 25-year long insurance. He has to pay monthly premiums for 25 years. He will receive a guaranteed lump sum amount from the total sum assured during this tenure. He will receive a 5% of the sum assured or insurance coverage after every five years. That means after five years he will receive his first lump sum amount then after ten years and then once after completing 15 and 20 years, respectively. At the end of the policy duration, i.e. after 25 years, he will receive the rest of the amount. Hence, during the tenure, he will receive 20% of the total amount, and the insurer will pay the rest 80% after the maturation of the policy.
Benefits Of Money Back Policy
- Money back policies offer the benefits of an investment plan as well as an insurance policy
- Policyholders can get tax benefits when they purchase money back policies
- Insurance cover is offered during the plan’s term to the policyholder
- The insurer offers regular payouts to the policyholder during the policy’s duration
- Money back policies help in saving for the future
- Money back policies offer riders that cover critical illnesses, disabilities, etc.
Reasons To Buy Money Back Policy
Unlike a typical insurance policy where the policyholder’s beneficiaries get the death benefit, a money back policy offers survival benefits. However, the insurer pays survival benefits at different intervals. There is not much difference between an endowment policy and money back policy only that a money back policy offers regular liquidity.
A money back policy offers the advantages of an investment scheme and insurance plan. The policyholder gets death and survival benefits. Money back policies can be a stable source of income as pay-outs are made in periods. A policyholder can finance their plans for retirement.
If the policyholder survives the duration of the regular policy, then they will not get a return on investment. However, money back policies offer guaranteed returns and regular pay-outs. Money back policies give periodic income as well as financial protection to the policyholder's beneficiaries.
The policy gives an opportunity to make profits on investment. Also, the insurance company offers a guaranteed sum assured to the policyholder.
Advantages Of Money Back Policy
Returns accrue after a certain period
The first advantage of money back policy is that the returns multiply only after a few years. If you opt for a long term policy, you receive an amount every few years and it adds together to the sum.
Value of money is higher
There is a myth that the money back policy does not offer as good returns as compared to the investment plans. What they forget is it is an insurance cover and not a pre investment plan.
Full sum assured is received
In a money back policy, you receive the complete sum assured amount on maturity.
Conclusion
Along with regular benefits of money back policies, a policyholder can buy covers for different situations in riders. Riders are benefits that a policyholder can purchase in a policy above the normal cover.
Also read: Should I Invest In Money Market Funds Or Mutual Funds?
