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Money Back Policy
Your Financial shield for Uncertain Times
Guaranteed returns after a month^
Features of Money Back Policy
Money back policies come with distinct features that differentiate them from other insurance plans. Here are the key features of a money back policy:
Survival Benefits:
These are periodic payouts made during the policy term. They are usually a fixed percentage of the sum assured.
Maturity Benefit:
If the policyholder survives the policy term, they receive the remaining sum assured (after deducting survival benefits already paid), along with bonuses or additional benefits, if any.
Death Benefit:
In the event of the policyholder's demise within the policy term, the nominee is given the full sum assured, irrespective of the survival benefits that have already been paid.
Bonus:
Some money back insurance plans may also accumulate bonuses, which are essentially a share of the profits made by the insurance company. These bonuses add to the total payout received by the policyholder.
Benefits of Money Back Insurance Policy
The main benefits of a money back policy are:
Periodic Returns:
Money back plans provide periodic payouts, which can serve as a steady source of income at regular intervals. This is especially beneficial in managing short-term financial goals.
Life Coverage:
Like other life insurance, policies money back plans provide life coverage, offering financial security to the policyholder's family in the event of the policyholder's untimely demise.
Maturity Benefit:
In the event the policyholder outlives the policy term, they receive the balance sum assured along with accrued bonuses, if any.
Tax Benefits*:
Policyholders can avail of tax benefits* on the premiums paid and the benefits received under Section 80C and Section 10(10D)** of the Income Tax Act, respectively.
How Does Money Back Policy Work?
A money back insurance policy is a type of life insurance plan that offers the dual benefit of insurance coverage and savings. It provides the policyholder with life cover during the policy term along with periodic returns as a percentage of the sum assured at regular intervals.
Here's a comprehensive look at how a money back insurance policy works:
Choose the Policy and Pay Premiums
To begin with, you select a money back policy that fits your needs and start paying the premiums. The premiums can be paid annually, semi-annually, quarterly, or monthly, as per the policy terms and your convenience.
Receive Survival Benefits
Once you've paid premiums for a specific number of years, the policy starts offering survival benefits. These are periodic payouts, which are a certain percentage of the sum assured. These payouts are made at regular intervals (such as every 5 years) during the policy term.
Policy Continues
Even after the survival benefit is paid, the policy continues with the risk cover for the entire sum assured. Your premium payments also continue as before.
Maturity Benefits
If you survive the entire policy term, you receive the maturity benefit. This typically includes the balance of the sum assured (total sum assured minus the survival benefits already paid) along with any bonuses declared by the insurer.
Death Benefits
In case of the policyholder's unfortunate demise during the policy term, the nominee receives the full sum assured along with any accrued bonuses, irrespective of the survival benefits already paid out. The policy ends once the death benefit is paid.
Optional Riders
Many insurers also offer optional riders like accidental death benefit, critical illness cover, etc., which you can opt for by paying an additional premium. These riders provide added protection and benefits over and above the standard policy benefits.
In summary, a money back insurance policy is a unique blend of insurance and investment that not only provides financial protection to your family in case of your untimely demise but also guarantees periodic returns during the policy term, ensuring liquidity.
In summary, a money back insurance policy is a unique blend of insurance and investment that not only provides financial protection to your family in case of your untimely demise but also guarantees periodic returns during the policy term, ensuring liquidity.
11 Factors to Consider Before Buying a Money Back Insurance Policy
Before buying a money-back policy, it's important to consider the following factors:
When buying a money back insurance policy, it's crucial to carefully consider various factors to ensure that the policy meets your unique needs and financial goals. Here are some important factors to consider:
Financial Goals:
Understand what you want to achieve with the policy. Are you aiming for life cover, regular income, savings, or a combination of these? Knowing your financial goals will help you choose the right plan with the necessary features.
Coverage:
Consider how much coverage you need. This will depend on your financial liabilities, family’s living expenses, income levels, and future financial goals like children's education or marriage.
Policy Term:
Choose a policy term that aligns with your financial goals. For example, if you aim to fund your child's higher education, choose a policy term that matures around the time when the funds will be needed.
Premium Amount:
Make sure that the premium amount is affordable for you. It should not strain your finances or disturb your budget. Remember, defaulting on premium payments can lead to policy lapse.
Survival Benefit Payouts:
Check the frequency and the amount of survival benefit payouts. Choose a plan that offers payouts at intervals when you anticipate needing funds.
Company’s Reputation:
Research the insurance company's claim settlement ratio, customer service, and reputation in the market. A higher claim settlement ratio indicates that the insurer is more likely to settle claims successfully.
Policy Features and Benefits:
Examine the policy features, benefits, and the terms and conditions carefully. Look for any exclusions, limitations, or specific conditions that may apply.
Riders:
Consider adding riders for added protection. Insurance riders like critical illness, accidental death, disability benefit, etc., can significantly enhance your coverage.
Surrender Value:
Understand the surrender value of the policy, which is the amount you get if you decide to exit the policy before maturity. It’s important to know when your policy will acquire a surrender value and how much it will be.
Tax Benefits*:
Evaluate the tax benefits* associated with the policy. Money back insurance policies typically offer tax benefits* under sections 80C and 10(10D)** of the Income Tax Act.
Financial Advisors:
Lastly, it's always a good idea to seek advice from financial advisors or insurance consultants to understand the nuances of the policy and how it fits into your overall financial plan. Make an informed decision after considering all these factors.
Frequently Asked Questions on Money Back Insurance Policy
Money back policies are considered relatively low-risk investments as they offer guaranteed# returns and the bonus, if any, is not directly linked to volatile markets. However, as with any financial product, the performance of the insurance company can influence the returns.
The premiums paid towards a money back policy are eligible for tax deductions under Section 80C of the Income Tax Act, up to a limit of Rs. 1.5 lakhs per annum. Moreover, the survival benefits, maturity proceeds, and death benefits are generally tax-free under Section 10(10D)**, subject to certain conditions.
Money back policies are suitable for individuals seeking a combination of investment and insurance, with the added advantage of liquidity through regular payouts. They are particularly beneficial for risk-averse investors who want guaranteed# returns.
If you fail to pay the premium within the grace period, your policy may lapse, and you may lose the benefits of the policy. However, many insurers provide a revival period (typically 2-3 years from the first unpaid premium), during which you can pay the due premiums along with interest to reinstate the policy.
Insurance policies, including money back policies, are usually non-transferable. However, you can change the nominee of the policy by submitting the necessary form to your insurer.
If your money back policy has lapsed due to non-payment of premiums, you can revive it within the revival period by paying the due premiums along with interest or penalty, if any. Some insurance companies may require a declaration of good health or a medical examination.
You can surrender your money back policy after it has acquired a surrender value (typically after paying premiums for a minimum period, usually 2-3 years). You need to submit a duly filled surrender form along with the policy document to your insurer. However, surrendering the policy may lead to losses, and you may receive less than the total premiums paid.
The premium payment frequency of money back plans is flexible. It can be monthly, quarterly, half-yearly, or yearly, depending on the terms and conditions of the policy and your convenience.
In the event that the policyholder passes away unexpectedly during the period of the policy, the nominee will be entitled to the full sum assured in addition to any bonuses that have accrued, regardless of any distributions that have previously been issued. After the payment of the death claim, the policy will be cancelled.
Yes, after the policy has reached the point where it has a surrender value (usually after two to three years), policyholders are able to take out loans against their money back policies. The amount of the loan is limited to a particular percentage of the surrender value, which is determined by the insurance provider.
There are a variety of fees that may be associated with money back policies, including premium allocation fees, administration fees, fund management fees,
mortality fees, surrender fees, and so on. The specific fees can be found in the policy document, where they are subject to variation from one insurance plan to the next.
In most cases, increasing the amount of coverage that has already been purchased after the policy has been issued is not permitted under money back policies. However, if you want to enhance the amount of coverage you have, you can do so by purchasing an extra policy.
A rider is a supplemental benefit that can be added to your primary insurance policy for an additional premium. The
Accidental Death Benefit Rider, Critical Illness Benefit Rider, Disability Benefit Rider, and Waiver of Premium Rider are just some of the common riders that can be added to a money back insurance.
The money back policy's survival benefit is a predetermined percentage of the sum insured, and it is distributed in equal amounts at predetermined intervals during the course of the policy's term. Both the percentage and the intervals are defined, and the policy paper outlines both of these aspects.
In the event that you outlive the duration of the policy, you will be entitled to the maturity benefit, which is normally the balance amount assured (the entire sum assured less the survival benefits that have already been paid) in addition to any bonuses.
Due to the fact that they provide guaranteed# benefits, the returns on a conventional money back policy are not immediately impacted by changes in the market. However, the bonuses can be determined by how well the insurance does its job.
Although it varies from insurer to insurer, the normal minimum policy term for money back plans is ten years. However, this number can vary. The maximum period might be anything from 25 years and perhaps more.
The premiums paid for a money back policy are eligible for tax deduction under Section 80C, and the death benefit, survival benefit, and maturity benefit are generally tax-free under Section 10(10D)**, subject to certain conditions. However, if the premium is more than 10% of the sum assured, the benefits may be taxable.
You will be able to purchase a money-back investment plan through either offline or online distribution channels.
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Disclaimer
*Tax benefits are subject to changes in tax laws. Kindly consult your financial advisor for more details.
# Provided all due premiums are paid.
** Sec 10(10D) benefit is available subject to fulfilment of conditions specified therein
ADV/7/23-24/1086