Money Back Policy is a type of life insurance that offers the benefit of financial cover as well as investments. A money back policy can help you to generate income at regular intervals throughout the policy tenure. With it, a policyholder gets to provide financial security to his or her loved ones in the event of death and on survival the policyholder gets back the maturity amount after the policy term.

A Money Back Policy is a life insurance plan that offers dual benefits: financial protection and investment returns. It provides regular payouts to the policyholder at set intervals during the policy term, ensuring a steady income stream. In case of the policyholder's death or an accident, the policy ensures financial security for the loved ones. Additionally, if no claims are made, the policyholder still benefits from the regular payouts, making it a secure and rewarding option.

How Does A Money Back Plan Work

As its name suggests, a money back plan is a form of life insurance that allows the policyholder to receive a portion of the total sum assured at regular intervals, such as monthly or yearly, instead of a lump sum at the end of the policy’s period. This way, money back policy works differently from a standard insurance plan, wherein a lumpsum payout is given to the nominee in case of the policyholder's demise. The payout amount received in the money back policy is referred to as 'survival benefit'. An example to help you understand better: 

Let’s take an example to help you understand how a money back plan works. Here is an imaginative scenario. Mrs. Ganeshan buys a 20-year money back policy with an assured sum amounting to Rs. 50 lakh. The money back plan offers Mrs. Ganeshan 20% survival benefits in every 5 years of the policy, starting from the purchase date of the policy. Now, Mrs Ganeshan will thus receive Rs. 10 lakhs in the fifth, tenth, fifteenth and twentieth year of the money back policy. Additionally, in the last year of policy, i.e., the 20th year, she would also get the remaining Rs. 10 lakh, coupled with any bonuses, if there were any. However, if Mrs. Ganeshan unfortunately passed away in the 15th year of the money back policy, then her nominee would receive the entire assured sum as death benefit despite Mrs. Ganeshan had already availed Rs. 40 lakhs as survival benefits.

It is noteworthy that unlike traditional market investments such as stocks or bonds that are risky and volatile, the money back policy does not possess such a high degree of risk aspect towards your investment. Money back plans ensure a guaranteed and steady income inflow throughout the policy tenure, thus offering a safe and secure investment option for you.

A money back policy is one of the best long-term investment plans available in the market. Here are some of the reasons stating its significance:

1. It is a combination of insurance and investment which means it enables the policyholder to earn some income at regular intervals along with a death cover in the event of the policyholder’s unfortunate death.

2. It enables the policyholders to receive guaranteed returns on their investments and at the same time multiply wealth through various investment plans.

3. Moreover, the assured annual pay-outs and the life insurance coverage help in making excellent choices in income and security.

4. Policyholders can invest in various types of money back plans depending on their life stage when he or she is making an investment. For example, if you avail a child insurance plan, it can help to cover your child’s education

Key Features of Money Back Policy

Money back policy has several features that prove to be beneficial for your financial goals:

1. Guaranteed Returns: Low-risk, non-linked money-back policies offer guaranteed returns at regular intervals.

2. Life Coverage: These policies help you secure your family’s future with the sum assured. Your loved ones receive the payout if anything happens to you.

3. Bonus and Additions:Many policies offer bonuses, enhancing the policy’s value over time.

4. Flexibility: You can choose a policy that aligns with your financial goals.

5. Regular Pay-outs: A money back policy allows a policyholder to earn period pay-outs at regular intervals throughout the policy tenure.

6. Survival Benefit: Survival benefits are basically periodic payouts which a policyholder receives at the end of the tenure.

7. Maturity Benefit: Apart from survival benefits, these policies provide a lump sum payout as a maturity benefit.

8. Death Benefit: It also provides a death benefit to the beneficiaries or nominees of the policyholder in the event of an unfortunate demise of the policyholder.

9. Guaranteed Surrender Value: Also the policy allows a guaranteed surrender value in case a policyholder decides to discontinue the policy within the given tenure.

10. Income during the Policy Term: It ensures the policyholder gets to earn guaranteed returns at a regular interval throughout the policy tenure which acts as a second source of income.

11. Add-on Riders: You can also add riders over and above the base policy such as accidental death cover, critical illness cover, etc

12. Tax savings: Tax benefits on life insurance applicable under deductions under 80C and section 10(10D) you can save tax on premiums paid and maturity amount.

Understanding Money Back Plan with an Example

Let us understand how a money back policy works with the help of an example. Say for instance Mrs Rinika Mukherjee, a working lady avails a child money back policy. Assuming that the age of her child is 12 years, she purchases a policy with a sum assured of Rs. 30 lakh with a tenure of 25 years. Hence, Mrs Mukherjee will have to pay a premium throughout the policy tenure. According to the policy, she will receive a survival benefit of 25% of the total sum assured after every 5 years.  Upon maturity, she will receive the last 25% of the sum assured along with any bonus if applicable. The sum assured will be paid out in multiple installments in the 5th, 10th, 15th, and 20th year and the last 25% will be paid in the 25th year along with bonuses if applicable. In case of her unfortunate death any time within this period, her child will receive 100% of the sum assured amount plus all accrued bonuses. This is on top of any and all survival benefits already availed.

Eligibility Criteria for Buying Money Back Policy

Here are the eligibility criteria required to apply for a money back policy, which are as follows:

1. The age of the individual should be a minimum of 18 years and a maximum age of 55 to 65 years. Usually, the age bracket varies from insurer to insurer.

2. The individual should also have a stable income flow and must be capable of paying the insurance premium on time.

3. The policy term can be anywhere from 10 years to 25 years, but it cannot go beyond the maximum permitted age.

Documents Required to Buy Money Back Policy

Listed below are the documents required to buy a money back policy:

1. Age proof: Any one of the following can act as an age proof- PAN card, voter ID card, passport, Aadhaar card, driving license.

2. Address proof: Any one of the following can act as an address proof: Voter card, passport, Aadhaar card, driving license, ration card or any utility bills

3.Income proof.

4. Medical reports or certificates, doctor’s prescription

5. Policy application form carefully filled

The riders available with Money Back Policy

You can also add riders over and above the plan money back policy some of which are as follows:

1. Waiver of Premium: It allows the policyholder the facility to waive off their premium payment under several circumstances.

2. Accidental Death Rider: In case of an accidental death of a policyholder, this rider provides a death benefit to the policyholder's beneficiaries.

3. Terminal Illness Rider: This rider enables the policyholder with assured cash if he or she is diagnosed with a terminal illness such as heart attack, stroke, kidney failure etc.

4. Hospitalization Rider: It provides the policyholder financial assistance when he or she is hospitalized and provides cover for eligible treatments.

5. Accelerated Sum Assured: If the Life Assured, or if more than one Life Assured the first to become critically ill of the Lives Assured, becomes critically ill by suffering one of the illnesses defined , a sum as specified in the Policy Schedule shall be payable.

6. Critical Illness Rider: A critical illness rider financially empowers you to get the best possible treatment without worrying about costs, in case the Life Assured is diagnosed with a Critical Illness

How to Choose the Best Money Back Policy?

Here are some of the key parameters which must be taken into consideration to choose the best money back policy.

1. Financial Goals: The first and foremost thing to consider is your financial goals. This can include goals like buying a house, planning an expensive vacation, funding children's education, etc. Based on your medium and long-term financial goals, you can choose the most appropriate plan.

2. Coverage: Based on certain factors like the standard of living of your family, living expenses, your contribution to the total family income, etc., you should determine the sum assured amount. This amount has to be enough to cover your family’s immediate and long-term needs.

3. Policy Term: It is important to read the terms and conditions of a money back policy before finalising the same. There can be various exclusions in the policy which are not displayed at the forefront while advertising. It is best to read through all the terms and conditions to know the consequences of various situations you may face.

4. Premium Amount: It is also another crucial factor to consider and you must choose the amount of premium in such a way that it does not feel like a financial burden to you.

5. Riders: Some of your insurance requirements may not be covered in the base policy such as critical illness coverage, accidental death cover, etc. Therefore, choose riders wisely over the base policy based on your financial needs and affordability.

6. Company's Claim Settlement Ratio: Consider checking the claim settlement ratio of the insurance company. It is a figure denoted in percentage which reflects how many claims it has settled out of 100. Hence, the higher it is the more the chances for the policyholder that the claim will be settled