Individuals opt for a comprehensive life insurance policy that will create guaranteed support for their future financial needs or their family’s security. Among all the life insurance policies, a savings plan with life cover and a money-back feature can guarantee the financial assistance you need in times of emergency fund requirement or for satisfying your long term goals.
Let’s look at how a money-back policy can help you tackle financial emergencies.
How Does Money Back Policy Work?
A money-back plan is a smart investment that solves the problem of liquidating funds by providing the policyholder with a percentage of the sum assured at pre-determined intervals throughout the policy tenure.
A money-back policy offers policyholders investment opportunities, maturity benefits and survival benefits. A simple money-back plan with a 20-year tenure pays the policyholder a survival benefit during the tenure. Around 20% of the Sum Assured is paid out at regular intervals, while the balance is paid out when the policy matures.
If the policyholder does not survive until the policy maturation, the beneficiaries will get the death benefits, and the policy is terminated.
Features of a Money-Back Policy:
- Money-back plans offer the policyholders a low-risk investment option as well as insurance coverage.
- If the policyholder meets an untimely demise during the policy tenure, their beneficiaries will get the entire Sum Assured, irrespective of the amount which is already paid as survival benefits.
- The policy provides a regular income source as ‘survival benefits’ for the policy duration.
Benefits of a Money-Back Plan:
- It pays out benefits throughout the term as regular benefits.
- It provides insurance cover throughout the policy tenure.
- It provides the benefits of both long-term investments with good returns and insurance coverage.
- It offers regular income along with long-term savings.
- You will have the option of including optional riders like critical illness, disabilities, specific illnesses, etc.
- Most money-back plans are among the best tax saving options that offer guaranteed returns during the policy tenure. It offers tax benefits to the policyholders under Section 80C and Section 10 (10D) of the Indian Income Tax Act.
Selecting the Perfect Money-Back Insurance Plan:
Choosing the right money-back policy is vital to ensure you get the maximum benefits from the plan. Always consider the policy tenure as the average term on a money-back plan is around 20 years. Since the money-back policies provide the policyholders with a survival benefit, calculate the sum assured percentage you wish to receive. The amount must be sufficient enough to cover different expenses.
Since there is an investment component in money-back insurance plans, it is advised that you consider the investment options available. Verify the period of payouts made throughout the policy tenure. For example, some plans offer payouts every 5 years, while in other plans, the timeline will vary.
Documents Required for Purchasing a Money-Back Insurance Plan:
- Age proof document
- Medical reports (if needed)
- Address proof
- Application form filled properly
You can also use a money-back policy premium calculator to calculate the approximate returns and the costs associated with the policy as well.
A money-back insurance plan is a good life insurance plan that will provide you with the benefit of insurance coverage and payouts during the policy’s tenure. And if you choose to surrender your money-back policy, you should do it after a period of at least three years worth of premiums so that it can attain cash value.
