A Money Back Policy is a type of life insurance that provides the dual benefit of both investment & protection. It allows you to receive returns at regular intervals during the tenure of the policy, & provides life coverage offering financial protection in the case of an unfortunate incident.
Considered as one of the best savings plan in India, in money back policy, a certain amount or percentage of the sum assured is paid back to the policyholder at regular intervals. If the policyholder survives throughout the policy tenure, they will get the remaining amount of the sum assured. If the policyholder dies during the policy tenure, the full amount of the sum assured is repaid to the nominee, irrespective of the fact that the survival benefits have already been paid.
Steps to Choose the Best Money-Back Policy
Provided are the steps to be taken while choosing the money back policy:
- Financial Objectives
A money-back plan is appropriate for both short-term & long-term financial objectives. The regular payouts received provide financial support to the family members throughout the policy tenure. Hence, before purchasing a plan, consider the short-term & long-term financial objectives.
- Coverage
Calculate the amount of sum assured by taking into consideration certain factors, like current expenses, present lifestyle, standard of living of your family, etc. Additionally, the coverage amount should be enough to meet the current & long-term requirements of your family members.
- Policy Tenure
Evaluate the tenure of the policy, whether it well aligns with the investment horizon or not.
- Premium Amount
Choose the premium amount by considering your budget, ensuring it is affordable to suit your present financial position.
- Riders
The appropriate riders must be chosen well in advance, as they are not included in the plan. The choice of riders should meet your financial requirements & budget.
- Claim Settlement Ratio
It means the percentage of total claims settled out of the total claims received during a financial year. The higher the claim settlement ratio, the higher the chances are that claims will be settled in an efficient & prompt manner.
Steps to Buy a Money Back Plan
Provided are the steps to buy a money-back plan:
- Conduct Proper Researc
Conduct thorough research & analysis of the different money-back plans available in the market. This should be done after verifying that the features, benefits, claim settlement ratios, premium rates, & other relevant details are accurate.
- Select an Insurer Company.
Choose an insurance company that offers a high claim settlement ratio, good reputation, & prompt service, ensuring a hassle-free & smooth journey.
- Assess your financial requirements.
Make an assessment of your risk tolerance level, financial objectives, & paying capacity towards the premium amount to ascertain the most appropriate plan.
- Consult a Financial Advisor
You can also consult a financial advisor to guide you in choosing the best-suited money-back plan depending on your financial needs.
- Fill Out the Application Form
Fill out the application form with accurate details & information to submit it along with the relevant documents.
- Make a Payment towards the Premium
Pay the premium amount according to the applicable terms & conditions, i.e. single premium, half-yearly, yearly, monthly, or quarterly.
How Does a Money Back Plan Work?
Let us now know how a money-back plan works:
- Choose the Plan & Pay the Premium Amount
Make a choice of the most appropriate money-back policy that best suits your requirements & start making payments towards the premium amounts. The payment could be monthly, quarterly, half-yearly, or yearly, i.e. according to your convenience.
- Receive Survival Benefits
Once the premium has been paid for a certain number of years, start getting the periodic payments, i.e. survival benefits, which would be a specific percentage of the sum assured. These payouts are received at a regular interval throughout the policy tenure.
- Policy Continues
Once you start receiving the survival benefits, the plan continues, along with the risks involved towards the amount of sum assured. Also, continue making payments towards the premium amount.
- Maturity Benefits
The maturity benefits will also be received if you survive the complete policy tenure. This includes the total amount of sum assured minus the survival benefits paid already, i.e. balance of sum assured, along with bonus, if any, declared by the insurance company.
- Death Benefits
If the policyholder dies at any time during the policy tenure, his/ her nominees will receive the entire sum assured along with bonuses, if any. This amount will be over & above the survival benefits received, & the policy will stop continuing once the death benefits are paid.
- Optional Riders
Some insurance companies also offer additional riders, such as a critical illness rider, accidental riders, etc, to enhance the present plan at some added cost.
In nutshell, a money back plan offers insurance cum investment benefits, which offers protection to the family members in case of a sudden demise of the policyholder along with the guaranteed returns in the form of survival benefits throughout the policy tenure, which ensures liquidity of funds.
Illustration
Mr Amit, a 35-year-old, buys a money-back plan of 20 years, having a sum assured of INR 10 lakhs, with an annual premium amount of INR 50,000. Now, the plan will work in the following manner:
- Sum Assured: 10 lakhs
- Policy tenure: 20 years
-
- Survival Benefits to be received at the end of 5th, 10th & 15th year: 20% of the sum assured
- Death Benefit: If Mr. Amit dies at any time during the policy tenure, his nominees will be entitled to get INR 10 lakhs, irrespective of the survival benefits received.
- Maturity Benefit: Remaining 40% of the sum assured, along with a bonus paid at the end of the 20th year
Conclusion
Though there are multiple investment options available, every option has its own pros & cons. However, when it comes to choosing the Best Savings Plan that provides both coverage & returns, the choice should depend on the financial objectives, investment criteria, & risk tolerance. You may also consult a financial advisor to receive customised advice tailored to your specific needs.