Money Back Plan
Money back plans are ideal for those who are looking for a product that provides both - insurance cover and savings. You may also go in for this policy to utilize the tax-free sum of money receivable - to visit your favorite holiday destination, maybe. Or perhaps you can re-invest the amount.
In a money-back plan, you keep getting a percentage of the sum assured during lifetime of the policy. In case of the insurer outliving the term, he/she gets the remaining corpus with accrued options like bonus. In the event of his/her death before the full term of the policy, his/her nominee or legal heirs get the sum assured irrespective of the number of installments received, with accrued benefits.
Money Back Premium: Basics
Money back policies are the costliest traditional plans offered by insurance companies. This is because these plans return parts of the sum assured periodically, within the policy term. Another reason for the high premiums is that, if the insured dies even after getting 60 per cent of the sum assured in the form of survival benefits, the family of the insured gets the full sum assured (despite the 60 per cent of the sum assured already paid). The premium is broken into three parts.
Money-back Life Insurance Plan
Get back the premiums you have paid for the insurance , Puzzled! The money-back plans provides life insurance cover for a specified period. The insured gets back fixed, tax-free proportions from the sum assured at fixed intervals.
The money-back plan provides life insurance cover for a specific period. During the term of the policy, the insured receives tax-free, fixed proportions of the sum assured at regular intervals. On maturity i.e. on surviving the entire term of the policy, the insured receives the balance portion of the sum assured, if any, plus the bonus/participating profit/ guaranteed addition for the term of the policy, if any, or the value of the investments.
In the event of death of the insured during the term of the policy, the nominee still receives the entire sum assured (even if the insured had received fixed portions of the sum assured), plus the bonus/participating profit/guaranteed addition, if any.
The premium for money back policies is higher in comparison to endowment and term plans. If one purchases money back plans with guaranteed addition, the premium is even higher. Some companies offer an option in choosing the premium paying term.
Money back policies are advisable if the insured wants a product that provides both - insurance cover and savings. Many people prefer to buy such policies to utilize the tax-free sum of money receivable to go on a holiday, re-furnish their homes or even re-invest the same amount.
However, there are other ways to utilize this income. A substantial part of the premium paid for money back plans is used by the insurance company to generate the bonus or profit paid to the insured or the nominee. If one chooses to impose self-discipline and invest regularly, other saving/investment avenues, such as mutual funds, offer higher returns. Click here to learn why your insurance plan is not a good investment avenue as well.