A Money Back Plan is a kind of life insurance that offers the dual benefit of both investment & protection. It allows you to receive returns at regular intervals during the policy tenure, & provides life coverage offering financial protection in the case of an unfortunate incident. This plan best suits those individuals looking for short-term investment options, financial security, & regular payments.
This plan includes payment of survival benefits at regular intervals, making it a Best Savings Plan for those looking for both insurance & savings benefits. Additionally, this plan entitles the policyholder the receive maturity benefits if they survive the plan. The nominees of the policyholder will receive the entire amount of sum assured in case the policyholder dies, irrespective of survival benefits already received.
Eligibility Criteria
Provided are the eligibility parameters to be met to buy a Money Back Plan:
- The minimum age to buy a money-back plan is 18 years.
- The maximum age to buy a money-back plan is 65 years.
- It requires medical fitness from you, along with disclosure of pre-existing medical conditions, if any.
- It requires income proof from the policyholder to prove the capability to make payments towards the premium.
- The policyholder must obtain Indian citizenship.
Things to be kept in Mind before investing in a Money-Back Plan
Provided are the things to be kept in mind before investing in a money-back plan:
- Payout Structure:
This plan involves periodic payouts throughout the policy tenure, ensuring liquidity of funds and accomplishment of short-term financial objectives.
- Premium Costs:
As these plans involve regular payouts, their premium costs are higher, but the advantages often surpass the costs involved. This is because these plans offer both guaranteed returns and life coverage.
- Bonus Benefits:
Some of the money-back plans also include additional bonuses, such as terminal or revisionary, further enhancing the payout amount.
- Tax Advantages:
The premium amount paid is eligible for a tax deduction u/s 80C of the Income Tax Act, 1961. Also, the payouts are exempt from tax u/s 10(10D).
- Policy Term:
Choose a policy term depending on the financial objectives, such as a child’s education, marriage, buying a property, etc.
- Rider Options:
This plan allows the enhancement of the plan with certain additional riders, such as critical illness riders, waiver of premium, accidental death, providing an added security and mental peace.
- Liquidity:
This plan involves periodic payouts, providing you with liquidity to have access to funds every time, in comparison to traditional term plans, which include payouts at the time of maturity.
- Surrender Value:
Ascertain the surrender value in case you are terminating the plan and review the terms and conditions, payout amounts, etc.
- Guaranteed# Returns:
This plan offers assured returns throughout its policy tenure, which ensures financial stability to the family members in times of uncertainty.
- Market-Linked Options:
Some of the plans offer returns that are linked to the market, offering flexibility and allowing the growth of funds along with the periodic payouts.
Factors to be considered before buying a Money Back Plan
Provided are the factors to be considered before buying a Money-Back Policy:
- Financial Objectives:
Have a basic understanding of what you desire, i.e. what you want to achieve from the plan a life coverage, savings, or both. Having a fair understanding of the same helps you select an appropriate plan with all the necessary features and benefits.
- Coverage:
Decide the amount of coverage you are looking for depending on certain factors, such as livelihood expenses, future financial obligations, income levels, future financial objectives, etc.
- Policy Tenure:
Select a policy tenure that well aligns with your financial objectives. This means if you want to save for your child’s higher education, you should look for a policy tenure that will mature somewhere around when funds will be required.
- Premium Amount:
Look out for an affordable premium amount without having any burden on your budget. You should not delay making payment towards the premium amount, as it may lead to the lapse of the policy.
- Survival Benefit Payouts:
Consider the survival benefits payouts, i.e. select a plan that provides periodic payouts, especially at the time when you need the funds the most.
- Company’s Reputation:
Look out for the insurance company’s claim settlement ratio, financial reputation, customer service, etc., to ascertain the reputation of the company. The higher the claim settlement ratio, the faster the claims will settle.
- Policy Features and Benefits:
Understand the features, benefits, terms and conditions of the plan to look out for its inclusions, exclusions, conditions, or limitations, if any.
- Riders:
Additional riders, such as critical illness riders, death benefit riders, premium waiver riders, etc., help enhance the coverage of the plan at an added cost.
- Surrender Value:
Check out the amount that would be received in case you exit the plan before it matures.
- Tax Benefits:
This plan offers taxation benefits under sections 80C and 10(10D) of the Income Tax Act, 1961.
Available Riders in a Money Back Plan
Provided are the riders available to enhance the Money-back policy at some added cost:
Accidental Death Benefit Rider:
This rider promised to pay an additional sum rider in addition to the sum assured amount in an unfortunate death of the policyholder.
Critical Illness Rider:
This rider includes payment of the sum assured amount in case the policyholder is diagnosed with any critical illness.
Waiver of Premium Rider:
If the policyholder is diagnosed with any partial disability due to any unforeseen event, all the remaining future payments will be waived off.
Disability Benefit Rider:
If the policyholder meets with an accident and faces disability due to the same, this rider offers an income to him either through regular payouts or in a lump sum.
Income Benefit Rider:
This rider offers the benefits of a regular and steady income for the nominee in case of the unfortunate death of the policyholder.
Conclusion
Though there are multiple investment options available, every option has its own pros & cons. However, when it comes to choosing a savings plan that offers 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.