Plans allow systematic enhancement of wealth with insurance
When we take up responsibilities, we anticipate the financial liabilities attached. We foresee expenditures that will happen from time to time. Take for example the birth of a child. Five years and you will need finances to get the child into a good school, another five years and the child’s fees and extracurricular activities put a financial burden then come higher education and so on. There is a need to fulfill the basic requirements of life having a car in next few years, arranging for a corpus to buy property, home renovations every few years. The lists are never ending.
Money back policies are quite popular as they offer insurance savings and regular returns. Timely purchased money back plans dissipate a major part of such financial liabilities.
Money back plans are fixed duration insurance plans with savings feature attached and hence an investment linked insurance policy. There is a sum Assured if the Policy holder dies within the duration but money back plans are taken primarily for the survival benefits. The survival benefit, in case of a money back plan, is paid at regular intervals rather than at the end of the term. You start receiving back a fixed percentage of the Survival Benefit at a after every five years or ten years or as the policy mentions.
Usually the point of debate is that the returns are lower than a market linked policy of the same amount. Consider this: most insurance policies announce Loyalty Additions from time to time. They are added to the survival benefit. Many insurance companies have a policy of giving guaranteed benefits, a fixed percent of sum assured. All these benefits are added to the Maturity amount at the end of the policy.
An important benefit of a Money Back Policy is that even if the policy holder dies after having received a few money backs, full Sum Assured is given to the nominee without deducting the already paid amount. This facility strengthens its role as a life stage planning instrument.
If you have taken the policy for pre defined purpose as in case of planning child’s education needs, you may opt for Waiver of Premium rider, often offered by the insurance companies with money back plans. Here the Beneficiary receives the benefit in due course of time without having to pay any further premiums in event of your untimely death.
Here it is important to note that the certain child plans where the maturity amount can be split into two or more maturity stages are not considered money back plans but “child plans allowing periodic payment of maturity amount”.
Considering the other benefits, returns are reasonable. It is a good policy for low Risk profile people who wish to save and invest in safe plans. Since these are not flexible plans and surrender value, if you wish to terminate the policy before its term, is not much, one needs to understand the provisions of the policy before buying it.