Categorized | Investment Insurance

what happens in a money back policy?

Due to the abundance of choice and variety of features in each life insurance plan, it is not an easy task to choose the investment plan that suits you the best individually. Added to this, every Insurer company offers attractive schemes to allure you and make you buy their insurance product.

If you are the one who wants fixed investment returns and with this you have certain responsibilities or ambitions in life that you want to accomplish in diverse time frame ranging in years you might find Money Back Policy a perfect investment plan for you.

Apart from fixed investment returns and periodical payments there are many more characteristics attached to money back policy. Read on further to know what purpose this investment plan can serve you and does it suit your financial structure or not.
How does money back Policy operate?

The amount invested by you in terms of Premium is divided in two parts in which one part is utilized to provide you assurance and Risk cover while other part is used as investment in government securities or financial instruments where fixed investment returns are guaranteed with zero percentage of risk.

What is the concept of periodical payments?
The Insured gets Survival Benefit under this plan that is, the insured gets lump sum amount which is a fixed percentage of sum Assured at fixed interval of time in case of insured’s survival.

For instance, Mr. A bought the money back policy for 20 years and his Sum Assured is Rs. 100,000, then he is entitled to get a lump sum amount of Rs. 20,000 which is 20% of sum assured at the interval of every five years for three times. Now, 60% of sum assured is already paid to Mr. A at the end of 15th year. And, rest of the 40% plus dividends is paid as lump sum at the Maturity of the policy i.e., at the end of 20th year.

Survival benefit and death benefit
The above calculation takes place in case of survival of the insured and therefore, periodical payment is also called as survival benefit. Whereas, there is another opposite Term called Death Benefit under money back policy. The term death benefit stands for the lump sum amount which includes total sum assured plus dividends irrespective of survival benefit that is, if Mr. A has received survival benefit of Rs. 40,000 and he dies before maturity of the policy, his nominee would be paid death benefit of Rs. 100,000 plus dividends and survival benefit of Rs. 40,000 would not be deducted from the sum assured.

The above features would definitely appeal you to invest your funds in money back policy but, there are certain limitations to this plan. Let’s see what they are and would they fit into your criteria of buying life insurance policy.

You can buy money back policy only for 20 or 25 years i.e., not less than 20 years or not more than 25 years. Other restriction is that you cannot buy the plan for sum assured less than Rs. 40,000. The maturity age is 70 years i.e., maximum age to buy the plan is 50 years for a 20 year policy or 45 years of age for 25 year policy. Moreover, if you want to convert your money back plan into any other kind of plan, then the option available to you is only term plan.

If you find that the above points can easily blend with your financial plan, go ahead and buy the money back policy.