A life insurance policy offers life cover to the person who purchases it i.e. a person pays certain amounts of money consistently towards a policy so that his/her family member, known as the beneficiary, is given the sum of money promised when the policyholder expires.
A money back plan is a type of life insurance plan that allows the policyholder to receive payouts at regular intervals during the policy term as part of the survival benefit. Insurance companies offer a survival benefit as a reward for survival. While this benefit is availed at the end of the policy term in most life insurance policy types, the money back policy has the unique feature of providing regular payouts during the policy tenure, to the policyholder.
A money back policy iinstallmentsent plan that gives you some part of the maturity benefit in regular instalments before the scheme period ends. The policyholder will receive regular payouts as long as he or she is alive, instead of a single lump sum at the end of the policy period or at death. However, once the death benefit payout is done or the maturity is reached, no further payments will be made through the policy. It is an investment-cum-insurance scheme which also has the advantage of liquidity after a few years. Money back policy is known as an Anticipated Endowment Plan in insurance parlance.
Some of the most popular money back policies in India are listed in the table below:
|Money Back Plans||Premium Payment Options||Policy Term||Min Entry Age||Max Entry Age||Maturity Age||Min Sum Assured|
|SBI Life - Smart Money Back Gold||Regular Pay: Annual, semi-annual, quarterly, monthly||12 years, 15 years, 20 years, 25 years||14-15 years||45-55 years||27 to 70 years (67 years for 12-year plan)||Rs.75,000|
|HDFC Life Super Income Plan||Limited Pay – 8, 10 or 12 years: Annual, semi-annual, quarterly, monthly||16 years, 18 years, 20 years, 22 years, 24 years, 27 years||30 days to 2 years||48 to 59 years||18 to 75 years||Rs. 1,28,337|
|LIC Money Back Plan 20 Years||Limited Pay for 15 years: Annual, semi-annual, quarterly, monthly||20 years||13 years||50 years||70 years||Rs.1 lakh|
|Reliance Nippon Life Super Money Back Plan||Limited Pay for half of the policy term: Annual, semi-annual, quarterly, monthly||10 years, 20 years, 30 years, 40 years, 50 years||18 years||55 years||28 to 80 years||Rs.1 lakh|
|Aviva Dhan Samruddhi||10 years: Annual, semi-annual, quarterly, monthly||10 years, 15 years, 20 years||13 years||55 years||23 to 70 years||Rs.1 lakh|
|Birla Sun Life Insurance Bachat Moneyback Plan||Regular Pay: Annual, semi-annual, quarterly, monthly||20 years||13 years||60 years||33 to 80 years||60 times the monthly base premium|
|ICICI Prudential Cash Advantage||Limited Pay – 5, 7 and 10 years||15 years, 17 years, 20 years||0 to 3 years||60 years||18 to 80 years||105% of total premium paid|
|Max Life Monthly Income Advantage Plan||12 years or 15 years Annual, semi-annual, quarterly, monthly||22 years, 25 years||18 years||50 to 55 years||75 to 77 years||
Money back policy is good for people who want to make an insurance-based investment but also want liquidity. With a money back scheme, you not only get life protection but also get a regular income from the profits you make through the policy investments. If you are a young individual, the policy will help you at regular intervals for various financial needs – such as down payments for a new vehicle or home, medical needs of self, parents or children, educational needs of self, siblings, spouse or children, prepayments of your loans, funding the wedding of yourself, siblings or children, etc. Money back policies being endowment policies, the risk factor is low and therefore you need not worry that your investment will not yield good results. Almost all money back policies gives guaranteed and fixed returns, which will allow you to plan your finances well.
When you buy a money back policy, you will be told for how long you need to pay the premiums. Some policies require you to pay premiums throughout the tenure, while in some policies you need to pay for a limited number of years only. This premium will be invested in secure avenues, and a small part of the amount goes into administrative fees and taxes. Once you start paying the premium, you will receive a certain percentage of the sum assured at regular intervals. This may happen while you are paying the premiums, or after you’ve stopped paying the premiums. The policy document will also tell you when you will start getting the money back payouts. Some policies give you cashback every 5 years, while some give you every year towards the last few years. You will continue receiving the money back until the scheme reaches maturity or until the policyholder dies, whichever is earlier.
If the policyholder meets his maker before the scheme’s maturity, the nominee/s will get the sum assured and death benefits as per the policy terms. Even if money back payouts have been made before the death of the insured person, it will not affect the sum guaranteed as death benefit. You can add riders to the money back plans to increase your protection levels and get higher death or maturity benefits. You’ll have to pay a slightly higher premium if you are adding riders to the policy. Maturity benefits, along with sum assured and accrued bonuses, are given to the policyholder if he or she outlives the plan.
A money back policy offers a secure life cover to the life assured as well as guaranteed returns on survival. This is the best life insurance policy type for anyone who wants to financially aid his/her family in case of his/her unfortunate death and also make sure he/she has another source of income that would be beneficial in the long run.
Money back policies are the best policies for someone who is looking for optimum life cover and assured returns.
Here are a few points you need to keep in mind before you buy a money back life insurance policy:
Most insurance providers give policyholders the option of checking the status of their policy and viewing key information about their policy through both online and offline channels. Listed below are the various channels through which you can check the status of your insurance policy:
Money back policies and term insurance policies are two of the most popular types of life insurance products. Listed below are a few differences and similarities between these two types of products.
Any one of these plans – a term insurance plan or a money back plan – could be the right option for you based on your coverage needs, financial goals, and premium payment ability. Thus, make sure to consider your needs and the needs of your dependents, research various policies available in the market, compare premium quotes offered by insurers, and opt for a policy that provides coverage as per your needs.
A life insurance policy is a long-term contract between the policyholder and the insurance provider. Thus, it is recommended that policyholders continue to pay their premiums and enjoy the coverage offered by the policy. However, under certain circumstances, policyholders might decide to discontinue or surrender their policy.
In most cases, the insurer will only pay the surrender value to the policyholder if the policy has acquired a surrender value. For your policy to acquire a surrender value, you are required to pay the due premium amounts, within the completion of the grace period, for a period of 2 – 3 policy years. Post surrendering the policy, the insurer will pay you the guaranteed surrender value or the special surrender value, based on whichever is the higher sum.
In most cases, if survival benefits have already been paid to the policyholder during the policy tenure, this sum of money will be reduced from the surrender benefit that is payable to the policyholder. The exact calculation of the guaranteed surrender value and the special surrender value can be found in the policy brochure. The policy cover will cease after the surrender benefit is paid to the policyholder.
Money back policies by various insurance companies have different eligibility parameters. The common criteria needed to buy a policy are:
Some insurance companies may also require you to declare your existing diseases.
Some of the documents that are usually asked by insurance companies are listed below:
A premium calculator tells you how much premium you would have to pay as per the policy and sum assured chosen by you. This is a very helpful financial tool that will allow you to plan your finances well and decide how much you need to keep aside every month or quarter or year. Before you use the calculator, you need to know the policy you want and the sum assured you expect. The tool will need you to input your age, the duration you want for the scheme, and your gender. You can also add the available riders to the calculator for accurate calculations.
Let us use the SBI Money Back Policy Premium Calculator and check what premium would be needed for the following parameters:
Policy tenure: 20 years
Sum assured: Rs.10 lakh
Age: 30 years
Result of premium including taxes: Monthly– Rs.5,607
Quarterly – Rs.17,147
Half-yearly – Rs.33,633
Annual – Rs.65,945
Riders are additional mini-policies that can be added to an insurance scheme. You will have to pay a little more amount as premium to add the riders. Each insurance company has its own list of riders that can be added to a money back policy. The riders that are commonly offered include:
Money back policies are great for you under the following circumstances:
Certain benefits of money back policies are listed below:
Survival benefits, which are unique to money back policies, are paid to the policyholder throughout the policy tenure. On the other hand, the maturity benefit is only paid at the completion of the policy tenure. Most life insurance policies, with the exception of term insurance plans, offer maturity benefits to policyholders.
The premium payment modes that are offered will vary based on the policy that you choose. However, the options that are commonly offered are the annual mode, bi-annual mode, quarterly mode, and monthly mode. Certain policies might also have a single pay option, wherein policyholders will have to pay the entire premium amount in a lump sum at the time of purchasing it.
The most common exclusion for life insurance policies is suicide. For a full list of exclusions that are applicable to your plan, make sure to read the policy brochure.
If you have just purchased the policy and are unhappy with the terms and conditions of the policy, you can choose to immediately return it to the insurer. All life insurance policies come with a free-look period, usually ranging between 15 days and 30 days. If policies are returned during the free-look period, the insurer will cancel the policy and return the premium that you paid after deducting a nominal amount for stamp duty charges and other such costs.
You can claim tax benefits for the premiums that you pay on a yearly basis under Section 80C of the Income Tax Act. Similarly, any payout that is offered by a life insurance policy is also eligible for tax deductions under Section 10(10D) of the Income Tax Act.
The eligibility criteria will usually vary from plan to plan and insurer to insurer. However, you will find the eligibility criteria for all plans in the respective policy brochure on the insurer’s website.
A pre-policy medical screening may not mandatory for every policy buyer. However, certain insurance providers might require you undergo a medical screening to ensure that you don’t suffer from any adverse medical conditions. Pre-policy medical tests might also be required if you are opting for a high sum assured or are over a certain age. Regardless of whether you are required to undergo a medical test or not, you will be required to provide a declaration of your health at the time of purchasing the policy.
The surrender value is a certain amount of money that is paid by an insurance provider to a policyholder if the latter decides to terminate the policy before the completion of the policy term.
Yes, you can choose to nominate multiple people for the same insurance policy. However, in this case, you will need to specify the percentage of the sum assured that each nominee will be eligible to receive in case of an unfortunate eventuality.
Age is a major factor in all insurance schemes. The older you are, the more premiums you will have to pay.
Yes. Most insurance companies will give you 15 to 30 days extra after the due date to make premium payments. If you still do not pay the premium, the policy will lapse after a couple of months, and you will have to pay late fees to revive it.
Yes, you can. The number of people you can nominate depends on the insurance company. You can also change the nominees whenever you want.
No, you cannot. No life insurance scheme allows transfer of the policy from one individual to another.
The surrender value of a policy is different from the sum assured, and is much lower. Usually, you cannot surrender a policy until at least 3 years are over.
You can only avail a loan against your policy if it has acquired a surrender value. Insurance policies only acquire a surrender value if the policyholder pays all due premiums on a regular basis for a minimum period of 2-3 years. Thus, once your policy has acquired a surrender value, you can take a loan against it. However, keep in mind that this might vary as per your insurer’s terms and conditions, thus make sure to read through your policy brochure to know if you are eligible to avail a loan.
Both money-back and endowment policies offer you the dual benefits of a savings tool and a comprehensive life insurance cover. The key difference between these two types of policies is the way in which the benefits are paid out. In the case of endowment plans, you will receive a payout, called the maturity benefit, in a lump sum at the end of the policy tenure.
On the other hand, money-back policies also provide regular payouts to the policyholder, in the form of survival benefits. Thus, a certain percentage of the maturity benefit will be paid out on certain policy anniversaries. In addition to this, the policyholder will also receive a lump sum payout at maturity of the policy. You can opt for any one of these two policies based on your financial needs.
A life insurance policy is a long-term contract. Thus, policyholders are required to pay premiums on a regular basis in order to maintain their life cover. If you don’t pay your due premium amount within the end of the grace period, your insurance policy could lapse. A lapsed policy will not provide insurance coverage to the life assured. Even if your policy has lapsed, you can revive the policy within a period of 2-5 years, based on your insurer’s terms and conditions, by paying the due premium amounts with interest and providing a certificate of continued insurability.
If you lose your policy document, you will have to notify the insurer about the same as soon as possible. The insurer will provide you a duplicate policy document, but might charge you a nominal penalty for the same.
The coverage provided by a life insurance policy is more or less fixed. However, life insurance providers offer riders or add-ons that policy buyer can purchase along with their base insurance policy to enhance the coverage that they receive. Riders can be of many types, such as the Accidental Death and Disability Benefit Rider, Critical Illness Rider, Waiver of Premium Rider, etc. The exact number and types of riders available will vary from policy to policy and insurance provider to provider. Thus, policy buyers who wish to customize their policy can purchase these riders for an additional premium.
In most cases, since the premium amount remains fixed for the duration of the policy tenure, there won’t be any changes to the premium payable, even if you start smoking or drinking after purchasing the policy. However, if the policyholder were to meet with an untimely death as a result of one of these habits, the insurance provider could deny the claim. Also, when you renew your insurance policy, you will have to declare that you are smoker. You might then be asked to pay a higher premium for your insurance cover.
When you purchase a life insurance plan, it is necessary that you opt for a suitable sum assured. Opting for a sum assured that’s too less will not help your dependents in case of an unfortunate eventuality, and opting for a sum assured that’s too high will leave you being over-insured and paying a high premium. Before you opt for the sum assured, make sure to consider the following factors:
If you wish to revive a lapsed insurance policy, you will have to immediately contact your insurance provider. Most insurers give policyholders the option of reviving their policy within a period of 2-5 years from the date of the first unpaid premium. In most cases, in order to revive a lapsed policy, you will have to submit a written request to your insurance provider. You can then pay your due premiums with the applicable interest charge and submit proof of continued insurability/good health, if required. Post this, your insurance provider will decide if the policy can be revived or not.
Yes, you can return your insurance policy during the free-look period. Policy buyers are offered a free-look period when they first purchase an insurance plan to go through the policy terms and conditions and decide if they find the policy satisfactory. If you choose to return your insurance policy during the free-look period, your insurer will refund the premium you paid. A nominal deduction may be made from the premium amount that you initially paid.
Insurance providers set eligibility criteria, usually with regard to the age limits, for insurance policies, which prospective customers need to meet in order to be eligible to purchase the policy. The pre-defined eligibility criteria will vary from policy to policy. Thus, make sure read the policy brochure to know if you meet the eligibility criteria set by the insurer for that particular policy.