A money back policy is an endowment 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.
Best Money Back Policies in India:
Some of the most popular money back policies in India are listed in the table below:
|Money Back Plans
||Premium Payment Options
||Min Entry Age
||Max Entry 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
||27 to 70 years (67 years for 12-year plan)
|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
|LIC Money Back Plan 20 Years
||Limited Pay for 15 years: Annual, semi-annual, quarterly, monthly
|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
||28 to 80 years
|Aviva Dhan Samruddhi
||10 years: Annual, semi-annual, quarterly, monthly
||10 years, 15 years, 20 years
||23 to 70 years
|Birla Sun Life Insurance Bachat Moneyback Plan
||Regular Pay: Annual, semi-annual, quarterly, monthly
||33 to 80 years
||60 times the monthly base premium
|ICIC Prudential Cash Advantage
||Limited Pay – 5, 7 and 10 years
||15 years, 17 years, 20 years
||0 to 3 years
||18 to 80 years
||105% of total premium paid
SBI Life – Smart Money Back Gold: This is a participating plan that gives cashback at fixed intervals during the policy period. The period at which you get money back depends on the tenure of the policy. You also get accrued bonuses and the remaining sum assured at the end of the scheme or as death benefit. The minimum premium amount is Rs.400.
HDFC Life Super Income Plan: This is a participating, non-linked, limited pay scheme. After the premium payment period is over, cashback is given to the insured person for the remaining policy tenure. So you can get regular profits every year for 8 to 15 years after you stop paying premiums. The money back receipts cease in case a death benefit is claimed.
LIC Money Back Plan 20 Years: This is a participating unlinked policy that gives money back every 5 years until death of the policyholder or maturity of the policy. An amount equal to 20% of the basic sum assured is given as money back, while at maturity you get the remaining sum assured and bonuses that have accumulated on the scheme.
Reliance Nippon Life Super Money Back Plan: This is a non-participating, non-linked plan that gives you cashback every 5 years until the end of the policy tenure. You need to pay premium only for half of your chosen scheme duration. Your total savings increase every year through loyalty additions, and the policy also gives a maturity bonus as survival benefit at the end of the policy term.
Aviva Dhan Samruddhi: This is a non-participating, unlinked insurance scheme with guaranteed money back every 5 years until the policy matures. You can get up to 125% of the annualised premium as money back through the payouts. You get guaranteed bonuses of 7% to 9% of the annualised premium every year.
Birla Sun Life Insurance Bachat Moneyback Plan: This is a non-participating life insurance policy that gives you insurance and money back with premiums as low as Rs.400 per month. The money back and maturity benefits depend on your entry age, chosen premium and tenure. You will get 20% of the base premiums paid per month as cashback every 5 years until the end of policy period, apart from the guaranteed maturity benefits or death benefits.
ICIC Prudential Cash Advantage: This is a participating limited pay plan which gives you guaranteed cashback from the time you stop paying premiums. For a 10-year policy, by paying an annual premium of Rs.30,000 for as few as 5 years, you can get Rs.74,451 as maturity benefit in addition to getting 12% of the maturity benefit as cashback every year from the 6th year onwards.
Why you need to buy a Money Back Policy?
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.
How does Money Back Policy work?
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.
Features and Benefits of Money Back Policy:
- Money back plans give both insurance cover and a regular income. This is a savings-cum-insurance plan.
- Money back schemes are low in risk and therefore make a good investment option for risk-averse individuals.
- Death benefits are not affected by regular money back payouts. Even if you have received money back earlier, in case of your untimely demise, your family will get the promised sum assured and other death benefits.
- There is flexibility in premium payments. You can choose regular payments where you pay premiums until the end of the policy tenure, or limited payments where you pay premiums for a specific number of years only. You can pay premiums once a year, once in six months, once a quarter, or once a month, as per your convenience.
- The scheme duration can range from 5 years to 20 years.
- You can get tax deductions under Section 80C for the premiums paid, and under Section 10 (10D) for the death or maturity benefits received.
- These schemes help you save money and get a regular income when you really need more funds.
- You can add riders to the policies to cover specific illnesses, accidental death, disability, etc.
How to choose a Money Back Policy?
Here are a few points you need to keep in mind before you buy a money back life insurance policy:
Money back amount: Money back policy allows you to manage your money quite well if you plan the whole process well. You could buy a scheme in such a way that the money back payouts are timed towards important milestones in your life where you might need a large amount of money – such as your children’s education or wedding, down payment for a vehicle or house, etc. Consider your future financial needs – medical, educational, lifestyle –and choose the sum assured/money back benefits accordingly.
Money back frequency: The number of times you receive money back from an anticipated endowment policy differs from scheme to scheme and insurer to insurer. Some plans give money back every 5 years, while some give money back every year. Choose a frequency that is aligned with your financial goals.
Steady income: You need to ensure that your income is stable enough to cover regular premium payments for the stipulated period of time. If your income is varying, you may not be able to pay premiums regularly and the policy may lapse. You may end up losing the scheme and its benefits, or at least you will end up paying late fees and penalty.
Tax savings: Most money back policies are eligible for tax deductions under Section 80C (for premium payments) and Section 10 (10D) for death and maturity benefits. Under Section 10 (10D), if your policy is bought before 31st March, 2012, and the annual premium paid is more than 20% of the basic sum assured, then the maturity or death benefits would be taxable. But if the plan is bought after 1st April, 2012, if your premium amount is more than 10% of the basic sum assured, then the payout will be taxable. So if your sum assured is Rs.10 lakh, then your annual premium cannot be more than Rs.1 lakh if you want to save tax. You’ll have to decide your tenure and premium amount accordingly.
Death benefits: Death benefits are lower in a money back scheme as compared to a term insurance policy, in proportion to the premium you pay. So if your main purpose in getting a life insurance scheme is to put a price to your life for the sake of your family, then money back policy may not be best for you. However, this does not mean that money back policies cannot give you good death cover. The sum assured paid at death does not discount the money already paid back to you during the course of the policy term. If funds permit, you could take a money back scheme with a high premium amount that will cover your life adequately while providing you good cashback as well.
Maturity benefits: Maturity benefits are lower in a money back policy than in a pure endowment plan. This is because more than half of the survival benefits is given to you in staggered payments during the scheme tenure. So if you want your insurance-investment policy to give you a lump sum at maturity for a large financial necessity you foresee, then you should think twice before choosing a money back scheme.
Premium amount: The premium for money back policies is divided into at least 2 parts – insurance premium and investment amount. So the amount of premium you need to pay for a certain life cover under money back policy may be higher than the premium required for a term insurance scheme.
Choosing the right plan: You should choose a plan according to your age, income, how much you can save in a month/year, and your future financial goals. The older you are, the higher your premium and future needs might be.
Eligibility Criteria for Money Back Policy:
Money back policies by various insurance companies have different eligibility parameters. The common criteria needed to buy a policy are:
- Minimum age of entry (0 to 60 years)
- Maximum age at maturity (18 years to 80 years)
- Sufficient income to pay the premiums
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:
ID Proof: A valid photo identity card issued by the government or a company, such as Passport, PAN Card, Driving Licence, Aadhaar, Voter’s Identity Card, MNREGA Job Card, company ID card, etc.
Residence proof: Apart from the above ID cards that include your permanent address, you might be asked for rental agreement (if you’re staying in a rented house), latest utility bills, Property Tax or Municipal Tax receipt, bank account or Post Office savings account statement or passbook, and other documents issued by the government of India.
Age proof: Any government ID card or document, or a school leaving certificate that has your date of birth.
Income proof: Latest payslips or certificate of employment.
- Your latest photographs.
Money Back Policy Premium Calculator:
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
Money Back Policy Riders:
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:
Term insurance rider: This rider can be added if a person wants a higher death benefit payment than what the money back policy gives.
Accidental death benefit rider: In case the policyholder passes away in an accident, this rider will provide the nominee with a lump sum amount as death benefit. This amount is in addition to the sum promised as death benefit for the main policy itself.
Total permanent disability benefit rider: This rider covers a person if they become completely disabled and unable to make money for the family, due to an accident. The rider will ensure that you get some part of the sum assured as a lump sum or cover the treatment, or disburse the sum assured and bonuses in instalments in order to allow the person to have a fixed income even if they are unemployed due to the disability.
Critical illness benefit rider: With this rider, if the policyholder contracts a severe disease such as critical heart ailments, cancer, multiple sclerosis, kidney failure, paralysis, or Alzheimer’s disease, then they will get a lump sum in order to help pay for the treatments. Some insurance companies will forgo future premiums if the insured person is diagnosed with a critical illness.
Major surgical benefit rider: This rider will provide a lump sum if the insured person has to undergo a major operation such as organ transplant or open heart surgery.
Family income benefit rider: If the policyholder dies or becomes permanently disabled due to an accident or major illness, then this rider will provide the family or nominee with a monthly income until policy reaches maturity. Some insurance companies also waive off premiums in such cases.
Premium waiver benefit rider: This rider can be added if you want the insurer to forgo the premium payments if the policyholder gets a severe disease or becomes disabled due to an accident. You will continue receiving the benefits of the policy until maturity even if you are not paying the premiums any more.
Are Money Back Policies for you?
Money back policies are great for you under the following circumstances:
- You do not favour risk and want to make investments that are safe and guarantees benefits.
- You want to save money while getting a life insurance cover at the same time.
- You have a financial goal for your future and might need some extra funds from time to time.
- You are a disciplined, savings-oriented individual.
- You have a secure income that allows you to put aside some money regularly for paying the premium amounts.
Money Back Policy FAQs:
Does my age affect the premium I would need to pay for a money back scheme?
A. Age is a major factor in all insurance schemes. The older you are, the more premiums you will have to pay.
Is there a grace period for paying premiums?
A. 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.
Can I nominate more than one person for my policy?
A. Yes, you can. The number of people you can nominate depends on the insurance company. You can also change the nominees whenever you want.
Can I transfer my policy to my spouse’s name?
A. No, you cannot. No life insurance scheme allows transfer of the policy from one individual to another.
If I surrender my policy, will I get any money or will I lose the premiums I paid till then?
A. 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.