Money Back Plans for Life Stage Planning
While planning an investment many a times you need a level of security that the money will be available to you and the family at the time of need. At times you wish to plan investments such that it provides financial assistance at specific times during life. Money back plan is favored by many for this very reason. It provides life insurance as well as survival benefits and is considered an important part of life stage planning.
What is Money Back Insurance
Money back insurance plan is a fixed duration insurance plan that offers survival benefits to the insured. Here a person is Insured for a specific amount called the sum Assured or sum insured and gets a Maturity benefit in case the person survives the duration of the insurance.
It is a traditional investment insurance plan where the returns are fixed at the beginning, the time of purchase. Survival Benefit or the maturity amount is paid out in parts at fixed intervals and balance, including Bonus if acquired, is paid out at the maturity date. Sum Assured is payable in case of death of the insured during the Policy term. It is paid irrespective of any survival benefits paid in between.
Here you have the flexibility to decide upon the sum assured and the maturity amount. Premium is calculated on the basis of these two factors. Minimum levels of insurance and maturity are generally fixed for specific policies.
Benefits of Money Back Plan
Money back plan has emerged a preferred Investment Insurance Plan for the following reasons:
- Survival benefit is paid at regular intervals. This can help the investor plan for crucial stages of life. For example, if a money back plan makes partial payment of the maturity amount every five years. You can plan it as a child education support fund as you may need this extra financial support for the child’s admission in school, and thereafter as the child grows for extracurricular or extra coaching etc.
- In case of death during the policy term, survival benefits paid till date are not deducted from the sum assured. Full sum assured is paid as death benefit.
- Bonus if applicable is calculated on sum assured and is not affected by any survival benefits paid during the policy years.
- Being a traditional plan, the investment is absolutely safe. Promised amount as mentioned in the policy is paid to the investor irrespective of any ups and downs in the financial sector. The insurance company is bound to pay the fixed amount at the specified intervals.
- Most plans have guaranteed additions over and above the fixed payable amount payable at the maturity of the policy.
Limitations of Money Back Plans
There are certain limitations of money back plans that one needs to think about besides the benefits:
- The premium is higher than a Term insurance plan – Since there is investment and survival benefit involved, premiums are higher than the term plans.
- Rate of return is limited to 5%-8% as the money is invested in secure funds. So, if you are looking for higher returns, you may want to rethink.
- Money back plan is not flexible as other investment options can be. The premium cannot be increased or decreased midway. It is not advisable to surrender the policy before the policy maturity date.
- Make sure that the regular paybacks are enough to meet or support your perceived needs at that time.
- Make sure that the premium amount and duration are convenient to you.
- Read the policy document carefully to understand the terms and conditions, actual amount payable and required conditions of paybacks.
Looking at all the pros and cons, money back plans are ideal for those looking for secure investments and savings over a period with regular paybacks. It can act as an important financial resource for managing crucial stages or planned expenses. Returns are limited but secure.
If you are not ready to take the market risks, want the security of insurance and need inflow from your investments from time to time, money back plans are meant just for you.