Money Back Policy: Policy that regularly pays YOU!
Most of us want to invest in a traditional life insurance policy for a long tenure to create a guaranteed corpus. However, we face a problem when we need funds before the tenure is over. A financial crisis might strike anytime and we need funds to tackle it. But a traditional life insurance policy comes to no help if the plan tenure is not over. We can avail a loan but it might be limited in amount. What to do? Is there a plan which pays lump sum benefits during the plan tenure?
Yes, there is. A money-back plan solves the problem of liquidity during the plan tenure by paying a percentage of the Sum Assured regularly through the plan tenure. Let’s understand the plan in detail.
As the name suggests, a money-back policy is a policy which gives money-back at regular intervals. This money-back is paid during the plan tenure and is a percentage of the Sum Assured. Money-back pay-outs are called Survival Benefits. These benefits are paid during the plan tenure and on maturity, the remaining Sum Assured is paid along with vested bonuses. However, if the insured dies during the plan tenure, the full Sum Assured is paid irrespective of the Survival Benefits already paid. This is what makes the plan unique. Some of the salient features of Money Back Policy are:
- The Survival Benefits are calculated as a percentage of the sum assured.
- Survival Benefits are paid at regular intervals during the plan tenure, the percentage of Sum Assured paid as Survival Benefits is also not fixed and varies between different plans.
- If the plan matures, the remaining portion of the Sum Assured (actual Sum Assured less the Survival Benefits already paid) is paid as maturity benefit. However, in case of death, the entire Sum Assured is paid irrespective of the money-back benefits already paid.
- Money-back plans usually come as participating plans where bonuses are added. The accrued bonus is then paid on maturity or on death.
- Riders are also available under many money-back plans. Rider benefits are paid as a lump sum only when the contingency covered by the rider occurs during the plan tenure.
Mira buys a money back plan for a Sum Assured of Rs.10 lakhs. She chooses a term of 25 years and pays regular premiums throughout the policy tenure. The Plan promises survival benefits @20% of the Sum Assured after every 5 years of the plan. On maturity, 20% of the Sum Assured is paid along with any accrued bonuses.
Mira, thus, receives Rs.2 lakhs every 5 years, i.e. in the 5th policy year, 10th policy year, 15th policy year and 20th policy year. At the end of the 20th policy year, Mira has already received Rs.8 lakhs. On maturity, Rs. 2 lakhs along with added bonuses would be paid to her and the plan would terminate.
If Mira dies on the 18th year of the policy, Rs.10 lakhs would be paid to the nominee along with the added bonus even though she has already received Rs.6 lakhs as Survival Benefits.
Benefits of a Money Back Policy
Survival Benefits: Money is paid to the policy holder every few years over the lifetime of the policy. The payment gets started after some years of the start of the policy and continues until maturity.
Death Benefits: The nominee of the policy gets the death benefit of the insured person. This benefit includes sum assured of the money back policy and bonus accumulated on the policy. But, this does not include the survival benefit as they are only given to the insured when they are alive.
Maturity Benefit: This benefit is received by the insured person on the maturity of the money back plan and includes Sum Assured + Bonus(if any)
Best Money Back Policies in India in 2018
|Money Back Plan||Plan Type||Policy Term||Maturity age||Minimum Entry Age||Maximum Entry age||Minimum Sum Assured|
|LIC Money Back Policy-20 years||A Traditional Endowment plan with money back facility||20 years||70 years||13 years||50 years||Rs. 1,00,000|
|Bajaj Allianz cash Assure||Traditional money back plan||16,20,24, 28 years||18-70 years||0 years||54 years||Rs. 1,00,000|
|SBI Life Money Back Gold||A Savings plan with life coverage||12 years (option 1) 15 years (option 2) 20 years (option 3) 25 years (option 4)||27- 70 years||15 years ( option 1 and 2), 14 years ( option 3 and 4)||55 years(option 1 and 2) 50 years( option 3) 45 years(option 4)||Rs. 75,000|
|Aegon Life Regular Money Back Insurance Plan||Money back plan with coverage||20 years||55 years (for 7-pay and 10-pay options,) 60 years (single pay option)||7 days||Min/Max: 75 years (7-pay and 10-pay option 80 years ( single pay option)||Subject to underwriting|
|Reliance Super Money Back Plan||Non- linked non-participating non-variable plan with life coverage||10, 20, 30, 40, 50 years||28-80 years||18 years||55 years||Rs.1,00,000|
|LIC Money Back policy for children||Child plan||25 years||25 years (min/max)||0 years||25 years||Rs.1,00,000|
|Canara HSBC OBC Smart Stage Money Back plan||Traditional participating money-back Life Insurance Plan||15 years||70 years||8 years||55 years||Rs.1,00,000|