Money back policy is an endowment plan with the benefit of liquidity. This unique combination provides financial support for the investor or to the family of the deceased policyholder any time before maturity and lump sum amount at the time of maturity for the surviving policyholders. It is a preferred and smarter way of investment when compared with traditional life insurance where people invest for a long tenure to create a guaranteed corpus. While long term goals are a priority, there are times when you would need interim payouts to meet your short term financial requirements.
Why do you need to buy Money back policy?
The reason why money back policy is important is that it gives periodical payments called Free-look Period benefits after certain period of time till the end of the Policy term. The remaining Sum assured is paid along with the vested bonuses. It is the best saving plan on which one can rely upon for unforeseen expenses or planned expenses, as the payments are time bound and guaranteed. This policy also covers life through the Policy term.
Benefits of Money back Policy
Gives flexibility of strategic planning of cash flows for one’s retirement.
It provides Free-look Period benefits like a percentage of Sum assured and maturity benefit along with accrued bonus.
In case of insured dies during the plan tenure the full Sum assured is paid irrespective of Free-look Period benefits already paid.
Advantage of getting bonus, depending on performance of Insurance Company.
Risk is covered for the Sum assured during the entire term of the policy.
It allows the policy holder to opt for withdrawal of cash at any time after payment of minimum stipulated Premiums.
It provides policyholders with low risk investment options as well as life insurance coverage.
This policy can be covered under the section 6 of Married Women Property (MWP Act.
Loan is not available in this type of policy.
How to choose a Money back policy
It’s quite a challenge for an individual to make a decision on the policy that will suit best for one’s requirement given that there are a wide range of policies offered by insurance companies. One has to consider a reliable insurance company and also evaluate the factors which will influence taking the policy, like:
Financial goals and time lines when there is requirement of funds.
Available funds for investment.
Time period or durations up to which one can stay invested.
Tax benefits offered by the policy.
Who should buy money back policy? These plans are very good for conservative investors who are looking for good returns but with an element of guarantee. It is also helpful for those who require money at regular and specific intervals for personal emergencies, any planned event or for business requirements. In addition to being a tax saving investment with guaranteed returns, it also provides comprehensive life insurance cover which is a win-win situation for investor.
If the insured commits suicide within one year from the date of commencement of policy the cover will become void, i.e. Nominee cannot claim Sum assured. Only the Premiums paid up to the date of death will be refunded, after deducting the expenses incurred by the Insurer for issuing the cover.<
The claim will be repudiated on deliberate non-disclosure of pre-existing diseases at the time of taking a policy and if death happens within 36 months due to suffering from same.
Riders in Money back policy
Accidental Death Benefit Rider
Accidental Total and Permanent Disability Rider
Critical Illness Rider
Waiver of Premium
How much cover do you need?
The minimum insurance one should have is 10 times of the annual income.
This policy not only offers protection but also offers Tax benefits under sec 80C, for the Premiums paid.
The maturity claim benefit and Death Benefit paid in case of death of the policy holder is exempted under sec 10(10D) of Income tax act 1961