Money Back Insurance Policies
A money back investment plan is designed to help investors protect themselves against the unpredictability of life. It offers a life cover along with regular guaranteed1 returns that are paid at predetermined intervals so that investors can meet expenses associated with milestone moments in life, such as buying a car, paying for a child’s higher studies, wedding expenses, and so on.
Benefits and Components of a Money Back Insurance Policy
A money back insurance policy has specific benefits and components that investors must take into consideration when planning for their future. These benefits and components are:
Survival benefits:
This refers to the sum of money that is paid every few years to the policyholder. This money is typically a percentage of the sum assured, and the actual amount can vary based on the policy chosen as well as the sum assured itself.
Maturity Benefit:
The maturity benefit is made up of a few components that are critical to understand. These include:
a. Sum assured
b. Bonus amount
c. Remaining survival benefit
a. Sum assured
b. Bonus amount
c. Remaining survival benefit
Death Benefit:
In some policies, the death benefit refers to the sum assured, while in others, the death benefit refers to the sum assured and bonus amount. As this can vary from policy to policy, it is essential to read the documents carefully to know what to expect.
Sum Assured:
The guaranteed¹ amount that is to be paid to the policyholder at the time of maturity. The sum assured is generally mentioned on the policy document.
Bonus:
The bonus refers to any profit on the investment made by the company on behalf of the policyholder.
Features of a Money Back Insurance Policy
The following are some of the features of a money back insurance policy:
Guaranteed Returns:
One of the key features of a money back insurance policy is that the plan offers guaranteed¹ benefits. While different policies have different payout periods identified in their documents, these survival benefits are typically paid every 5 years to the policyholder. The sum assured also falls under the bracket of ‘guaranteed¹ returns’.
Income feature:
As money back insurance policies offer periodic income, it allows investors to plan different purchases in the future, based on the policy’s payout plans. As a result, investors can rest knowing that their family can enjoy new milestones without worrying about finances.
Death Benefits:
During an unfortunate event, family finances are thrown into disarray. At such times, the death benefit from a money back insurance policy plan can help the family meet their immediate expenses and stay secure.
Bonus Amounts:
As a money back insurance policy is a participating policy, investors stand to gain a bonus amount at the time of maturity. However, it is important to note that the bonus is only applicable if the insurance company’s investments have turned a profit, and if the premiums were paid on time.
Add-on Riders:
As is the case with many life insurance policies, money back insurance policies can be enhanced with the help of riders³. These riders are discussed in further detail below.
Applicable Riders
Investors can easily enhance their money back insurance policies with the help of optional riders³. However, it is important to understand that adding a rider³ means an increase in the monthly or annual premium you must pay. The riders³ applicable for money back insurance policies are:
Critical Illness Rider
In case the policyholder is diagnosed with a critical illness (the term refers to a group of diseases categorised as critical in the policy document), then he/she would be entitled to a monetary payout that can help them meet expenses related to treatment. Generally, diseases such as cardiovascular disease, cancer, respiratory illnesses and so on are classified as critical illnesses.
Premium Waiver Rider
This rider³ ensures that the family of the deceased does not have to continue to pay premiums for the policy to be valid. In other words, the protection in the form of regular income can be continued even without paying premiums.
Accidental Death/Disability Cover
This rider³ ensures that the family of the deceased is entitled to an additional sum of money (apart from the sum assured and bonus) if the policyholder dies due to an unfortunate accident. The rider³ also ensures that there is a payout in case of a disability that affects the policyholder’s ability to earn.
Accelerated Sum Assured
Critical illnesses can require hefty sums of money for their treatment. This rider³ ensures that the sum assured is paid to the policyholder at the time of diagnosis so that the hospital and treatment expenses can be met.
Hospital Cash Benefit Rider
This rider³ is designed to pay daily cash to the policyholder in case of hospitalisation, so that expenses can be met. Depending on the rider³, there are benefits applicable for surgeries, ICU stay, and so on as well.
Term Care Rider
This rider³ ensures that a sum is paid to the nominee in case the policyholder passes away.
Frequently Asked Questions on Money Back Insurance Policy
A money back insurance policy is generally considered to be a low-risk policy. It offers guaranteed1 returns in the form of the sum assured and survival benefits. It also offers a bonus amount.
The following documents are needed to buy a money back policy:
- Identity proof (in the form of Aadhar Card, Passport, Driver’s License, and so on)
- Age proof (in the form of Aadhar Card, Passport, Driver’s License, and so on)
- Address proof (in the form of Aadhar Card, Passport, Driver’s License, and so on)
- PAN Card
- 2 Passport Size photographs
You should buy a money back insurance policy if:
- You are looking for an investment that offers guaranteed1 returns on a periodic basis.
- You want to guarantee having ample funds to meet different milestones in life (such as buying a car, paying for your child’s education, getting married, and so on).
- You want to secure your family in the event of an untimely death.
- You want a low-risk investment option.
- You are the primary breadwinner of your family.
The eligibility criteria for a money back insurance policy is as follows:
- Minimum entry age: Some money back insurance policies have a minimum entry age as low as 7 days, while others may have a minimum entry age of 18 years. Investors must read the policy document carefully to know if they are eligible for the plan.
- Maximum entry age: The maximum entry age for money back insurance policies can range from 55-60 years (the exact age can vary from policy to policy).
- Indian citizens are eligible to invest in money back insurance policies.
You can get the following riders3 to enhance your money back investment plan:
- Critical Illness Rider
- Premium Waiver Rider
- Accidental Death/Disability Cover
- Accelerated Sum Assured
- Hospital Cash Benefit Rider
- Term Care Rider
Under Section 80C of the Income Tax Act, the premiums paid for money back insurance policies are exempt from tax, upto Rs. 1.5 lakhs.
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Disclaimer
¹ Provided all due premiums are paid.
² Tax benefits are subject to changes in tax laws. Kindly consult your financial advisor for more details.
³ There are exclusions attached to the rider. Please refer to the brochure.
ADV/7/22-23/808
