Money Back Plan is a special type of life insurance policy that falls under Endowment Plans. In Insurance language it is called Anticipated Endowment Plans and commonly known as Money Back Policies. It simply means that in Money Back Plans, the money comes back to the Life Insured after a specific interval of time as Survival Benefit. However, if the Life Insured dies during the policy term, then the Death Benefit would be paid to the nominee and the policy would be terminated and no further money would be paid to him on the intervals.
Thus, a Money Back Policy is an endowment with a liquidity benefit. The Maturity Benefit comes in installments instead of a lump sum at the end. It is called ‘Survival Benefits’. Each installment is a percentage of the sum assured. The remaining bit comes as Maturity Benefit at the end of the policy term.
You should compare and find the best money back policy for your family before making a purchase.
Let’s take an example to understand this policy.
Sumit Agarwal has opted for a Money Back Life Insurance Policy. His plan has a Sum Assured of 5 lakhs for a policy term of 25 years. He would need to pay premiums for 25 years. And he would get back a part of the Sum Assured at regular intervals. For example, for a policy of 25 years, he would get 15% of Sum Assured after the 5th, 10th, 15th and 20th year of the policy i.e. he gets 15 X 4 = 60% of the Sum Assured as Survival Benefit. On Maturity of the policy he would get the remaining 40% of the Sum assured.
Depending on the type of policy the payback schedule might vary. So you would need to check the individual plans for the same.
Since there is both Maturity Benefit and Death Benefit, the premium is usually on the higher side in Money Back Insurance Policies. Also the Death Benefit is not reduced till the policy matures and hence the company’s risk also continues till the end even as liquidity benefits are provided to the customer.
Who should buy Money Back Insurance Policies?
Money Back Insurance Policies should be taken by someone who might require money at regular and specific intervals, like children’s education, etc. Also because the Death Benefit is guaranteed irrespective of the Survival Benefits already paid. Thus, if the Life Insured dies on the year of the policy maturity even after receiving 4 Survival Benefit, the nominee would get the entire Sum Assured and not a reduced one. You can also save tax as the premiums paid and the money received in installments are tax-free.