Why Opt for Money-back plans - A Guide
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Insurance policies tend to provide benefits to the beneficiaries of the policyholder during the event of the policyholder’s death. This amount is called the sum assured. However, would it not be perfect if the policyholder too could enjoy the benefits of paying the premiums?. Money-back policies are just that.
A money-back plan provides a dual advantage. In addition to the benefits provided by traditional insurance, money-back plans tend to provide their policyholders with payout maturity benefits in the form of ‘survival benefits’. It is an insurance policy with the benefit of regular liquidity. Hence, allowing the policyholder to leverage additional liquidity to meet their financial goals.
Why Should I Opt for a Money-Back Plan?
Since money-back plans tend to give out periodic pay-outs, they ensure a steady source of income to you, as a policyholder, thereby allowing you to meet expenses that occur at different stages of your life. Since they provide the benefits of an insurance policy as well as an investment, the policyholder earns a steady source of income.
This makes it an ideal choice for you if you are looking to earn a regular, steady income rather than just a lump sum. Thus providing you with a secure and assured return on investment. This provides you with additional liquidity offering you the opportunity to grow your wealth through other means of investments based on your financial goals.
Broadly, money-back policies have an investment tenure of 20 years, thus making it an investment with a long-term horizon. When it comes to ‘survival benefits’ around 20% of the sum assured gets paid out periodically and the balance would be paid out at the time of policy maturity along with a bonus if any. However, aspects like the tenure and frequency of benefit payouts tend to be subject to the providers providing the policy.
Key Benefits of Money-back Life Insurance-
As an investor looking to opt for money-back plans, it becomes key to learn about specific benefits associated with them. Here’s a list of pointers allowing you to decide on Why to purchase money-back plans -
- Similar to traditional policies, they provide insurance cover during the policy tenure
- Provides assured monetary benefits through the term
- The dual benefit of working as both an investment as well as an insurance policy
- Tax benefits can be leveraged
- In terms of its risk profile, it is a safer investment compared to mutual funds
- Given that the tenure tends to be 20 years, it allows for long-term investment in addition to providing a regular income
- There are optional riders that can be utilized to cover aspects like illness, disabilities and so on.
Money-back plan additional cover-
Similar to add-ons on traditional insurance policies, money-back plans provide policyholders with the option to add a cover that may not be included in the original policy document. These riders provide policyholders with covers such as accidental death, hospital expenses, and payments associated with disabilities and critical illness to name a few.
However, the options provided differ from provider to provider based on factors like policy tenure.
In general, the list of riders can be summarized as given below-
- Accidental Death- This rider provides coverage to in case the policyholder meets with accidental death, as outlined by the guidelines. In such cases, beneficiaries of the policyholder receive a lump sum amount.
- Term Rider- In times of uncertainty, this rider allows the policyholder a waiver from paying premiums under certain circumstances while still providing coverage to the policyholder.
- Rider for Critical Illness- this rider provides the holder of the policy with fiscal assistance in the event they contract a critical illness as defined by the rider.
- Hospitalization Rider- As the name suggests, policyholders with this rider help the policyholder with assistance in paying bills in the event of hospitalization. A daily allowance is issued to the policyholder to aid them in expenses associated with the treatment.
Choosing between a policy can be taxing. Key factors one would need to evaluate would include the tenure of the policy & frequency of term payment to name a few. With the possibility of modifying your policy to best suit you via riders, you may choose a plan that best suits your needs. However, the premium amount chosen would be a function of the risk-taking appetite.
Hence, when looking to choose a policy, given benefits like tax savings, lower risk profile compared to mutual funds and guaranteed returns in addition to death benefits. However, opting for a money-back plan comes down to your financial goals and aspirations.
Also read: Do You Think Money-Back Policies Are a Good Idea?
