3 Things You Need to Know About a Money Back Policy


Basic life goals such as education, marriage, a stable retirement should not exhaust a person’s finances at their most vulnerable point in life; knowing this reality insurance providers have given investors access to insurance types that promise guaranteed returns and on their investments in a manner best suited to them. A money back policy falls under this category which remains popular among investors today.

Investors today have a variety of lifestyle necessities and financial securities that need to be reinforced by a steady inflow of funds. Due to the various investment instruments in India, many investors choose to grow their funds through direct equities and mutual funds. But in those cases, the risk is directly proportional to the return margins. An investor has to maintain a keen sense of market trends and fluctuations. One may lose a big investment in the event of an unforeseen market fall, which can jeopardize their financial stability.

A money back policy is one of the best investment options in India that can mitigate these anxieties about market-dependent investment plans. It offers fund growth solutions and investment coverages to investors looking for low-risk alternatives. Investors that do not have a disposable corpus to invest in usually go for money back plan that yields significant returns with the added bonus of being tax-free, customizable, and earning survival benefits at tenure-based intervals. It is often considered a good fit for new, risk-averse investors. A per its definition, a money back policy is an insurance instrument that promises recurrent survival benefits to a policyholder during the course of the policy when they survive for a given period of time. As one can gauge from the name of the policy, it revolves around the policy having to start giving frequent payouts to the surviving policyholder while also providing coverage while receiving premiums from them to maintain said coverage.

It is a unique and guaranteed way of assured returns on a low-maintenance plan which is accessible and low-risk across all income brackets. Let us look at some of the features and benefits of a money back policy:

Guaranteed Sum Assured

Under a money back policy, there are certain types of assured benefits that are paid to the policyholder or their dependents during the tenure of the policy. The first is a survival benefit, which is the integral feature of the money back policy. As aforementioned, at designated intervals throughout the policy tenure, the policyholder will be paid survival benefits for surviving the policy term.

For example, if a policy tenure is 25 years long and the insured individual has decided on the payment intervals to be five years apart; the insurance provider pays the survival benefit to the insured on the 5th, 10th, 15th, and 20th year of the policy. On the 25th year, they shall receive a maturity benefit, along with the accumulated bonus and remaining survival benefit.

In the event that the policyholder passes before the tenure ends, the beneficiaries are given the death benefit sum assured along with bonuses, if any. Survival benefits are not paid with these plans as the terms require the amounts to only be payable if the insured survives.

Insurance Cover

A money back policy is regarded as a popular policy because of the holistic nature of the provisions it has under its policy plan. Alongside survival and maturity benefits with bonuses, one also avails an insurance cover under a money back policy.

The policy provides insurance coverage to the policyholder which is supported by the premium payments being maintained by the policyholder. While many investment plans have the provision of investment plans proving insurance coverage to their investors, a money back plan does it while having pre-existing payments and benefits within the plan making it a great choice for investors who require triple coverage for all situations.

Tax Benefits

Since a money back plan qualifies as an investment plan which is accessed by many, the premiums paid towards maintaining them are eligible for tax deductions under Section 80C of the Income Tax Act, 1961. The money back policy therefore also doubles as a tax saving investment plan where the investor is able to navigate their finances and apply for tax deductions under all premiums paid at the time of filing their income tax returns.

It is important to note however, that money back policy is only eligible for tax deductions if the premium being paid is less than 10% of the assured sum which is to be paid to the policyholder at the end of the tenure. This maturity benefit, when received is also exempted from taxation if it is at least 5 times the premium amount.

Therefore, a money back policy is a great tool to grow money, earn money, and also have insurance coverage all in one policy. Being as beneficial as it is, it can also be tailored to one’s requirements, where many insurance providers and their money back policies offer great bonuses, return margins, and secure coverage. Reach out to a financial advisor and find the money back policy best suited to your needs after adequate deliberation.

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