When
looking for investment options in India,
most people consider traditional life insurance policies to create a
corpus of funds. But what happens when the tenure is over? A financial
emergency can arise at any time that requires funds to tackle it. But a
conventional life insurance plan will only help when the policyholder passes
within the policy term.
Even though some of these plans may allow you to take a loan against
your policy, but what if it is not enough? The good news is that there is a
plan that gives you the benefit of a lumpsum amount during the policy tenure.
It is known as the money back policy.
A money
back plan will provide you the liquidity you need to stay afloat during
financial emergencies. In this article, we will discuss how the plan helps and
why you need to add it to your financial portfolio.
What is
a Money Back Policy?
A money
back policy, as the name suggests, offers a certain percentage of the sum
assured at certain intervals as the survival benefit. These benefits will be
paid to you during the tenure and the remaining balance is paid at the time of
maturity along with vested bonuses. However, should something happen to you
during the tenure, the full sum assured will be paid regardless of the survival
benefits that have already been released. Here are some of its features:
-
The
survival benefit is calculated as a percentage of the sum assured in your
policy document. These benefits are paid at a regular fixed interval. However,
the pay-out structure and the percentage of sum assured varies from plan to
plan.
-
At
the time of maturity, the maturity benefit minus the survival benefits already
paid will be paid to the policyholder.
-
These
plans are participating plans that are usually supplemented with bonus as per
the plan’s performance. The accrued bonuses are paid upon death or maturity.
-
You
can also supplement your money-back policy with riders. Rider benefits are paid
as a lumpsum amount when the contingency it covers occurs during the policy
period.
Benefits
of a Money Back Policy
There are
several benefits of investing in a money back plan, such as death benefit,
survival benefit, and maturity benefit. This amount is paid along with bonus
accrued during the policy term. This bonus will depend on the insurer’s
performance during the policy duration. Therefore, it is important to look at
all the components that make up the policy in order to choose the best one.
Let us
discuss the benefits in detail:
-
Survival
Benefits
During
the course of the policy, the money will be paid to the policyholder after
every few years as determined by the policy document at the time of investment.
You start getting paid after some years of the start of the policy and continue
till it reaches maturity.
-
Death
Benefits
The
policy nominee will get the death benefit if the insured person passes away
during the policy duration. The amount will include the policy sum assured as
well as the bonus accumulated until that time. However, it does not include the
survival benefit as they are only offered if the insured person outlives the
term.
-
Maturity
Benefit
The
insured person will receive this benefit from their money back plan upon
maturity. They will receive the sum assured that the policyholder chooses at
the start of their policy along with the reversionary benefits accrued during
the policy tenure. The latter will depend on the insurance company’s
performance. Therefore, it is important to invest in a robust insurer with a
solid track record.
-
Liquidity
The
liquidity feature of the money back policy makes it unique and a preferable investment plan. The survival benefits paid
during the policy duration offer you liquidity to meet your short-term goals
and also plan your finances to fulfil financial requirements at various life
stages.
-
Risk-Free
Return
If
you prefer risk-free investments with money back guarantees, then money back
plan is the perfect option for you. There is no risk involved and you receive
assured returns.
When
everything is going smooth, we don't consider investing our money in
instruments that lock our liquidity away for many years. But when you are faced
with a financial emergency, it is these instruments that come
to your rescue.
Financial
experts recommend building a corpus of funds through investment instruments,
like money back policy, that help you manage your finances and also give you
the peace of mind that your money is in safe hands.