New To Money Back Plans? Here's Everything You Need to Know

Money Back Plans

A money-back policy is a life insurance product that gives you regular returns or a lumpsum amount once the policy matures. A money-back plan is performance-based or can be a guaranteed amount, or both, depending upon the type of plan chosen, giving you the option to select your project as per your financial goals.

Why Do You Need a Money Back Plan?

If you want to be financially secure, a money-back policy can prove to be a great investment option. Here are a few benefits of such a plan:

  • The plan combines the benefits of both a life insurance policy and an investment, making it a guaranteed income scheme instead of a lump sum being paid out in case of an untimely demise of the policyholder.
  • Depending on your policy, you can get a guaranteed return on your investment in the form of an annual payout along with insurance cover if you are looking for a policy that offers the best of both worlds.
  • As a policyholder, you get a stable return on your investments through which you can increase your wealth by investing the money generated into other wealth investments.
  • The policy can be of many types depending on your requirement. For example, child money back policy, e.g., can help you plan and secure your child's future.

Who's Eligible for a Money Back Policy?

To be eligible for such a policy, you must meet specific criteria laid down by the insurance company.

For example, there are age limits and other such requirements laid out in the policy document. Therefore, make sure that you spend some time carefully going through the paper, as that will help you understand your eligibility.

The amount of premium to be paid and the payout you will receive.

Here are a few documents you will need if you are thinking of buying a money-back policy:

  • Salary slips, income tax returns, bank statements, and other forms of evidence of income are appropriate for income proof.
  • A driving license, Aadhaar card, voter's id, passport, and other forms of identification may be used as proof of address.
  • PAN card, Aadhaar card, a Voter ID card can be used as identification proof.


What are the Benefits of Such a Plan?

A money-back plan comes with a range of benefits; let's look at what it has to offer!

Survival Benefit

You continue to receive a payout every few years over the course of the policy. The payout starts after a few years of the policy coming into effect and continues to payout till its maturity, making it one of the best investment options in the market.

Death benefit

In case of the policyholder's unfortunate demise, the policy pays a death benefit to the nominee. The payout consists of the sum insured and any bonuses accrued on the policy. However, it won't include the survival bonus, which is only paid out if the policyholder survives until the plan's maturity.

Maturity Benefit

Once the plan matures, the policyholder is entitled to a maturity benefit. A maturity benefit consists of the following:

  • Sum Assured: The entire covered amount laid out in the policy.
  • Bonus: This consists of the insurer's declared reversionary benefits that have been accumulated over time. However, this bonus is dependent on the company's performance.

Tax Benefit

The policyholder is entitled to tax deductions under section 80c of the IT Act. You can get deductions up to ₹1,50,000 in life insurance premiums. Moreover, the money you receive on policy maturity is exempt from taxes under section 10 (10) D.

What are the Features of a Money Back Policy?

A money-back policy comes with many features attached to the plan.

Guaranteed Returns

Money-back plans give you guaranteed returns. In addition, you get a survival benefit. In the unfortunate demise of the policyholder's untimely death, the nominee receives the guaranteed amount and accrued bonuses. All of these benefits are also applicable in the case of child insurance plans.

Regular Income

A money-back plan offers you a steady payout every few years, providing you with a second income source, making these plans a financially wise decision with unpredictable inflation rates.

Increase Cover with Riders

You can increase the overall cover by opting for riders provided by insurers. In addition, you have the option of choosing riders across categories like medical conditions, critical illness, accident cover, and term riders.

Bonus Payouts

A money-back plan offers a range of bonus payouts, including performance, maturity bonuses, making a money-back plan one of the best pieces of investments you can make.

Before making the investment decision, make sure you understand the policy terms and conditions and other key components of a money back policy.