A money back policy is a type of life insurance plan that helps the insured person to get a percentage of sum assured at regular intervals, instead of getting the lump sum amount at the end of the term. It is an endowment plan with the benefit of liquidity. The pay-outs of the money-back policy is called Survival Benefits. These are paid during the tenure of the plan, and on maturity, the remaining Sum Assured is paid along with the vested bonuses. Vineet Arora, MD and CEO, Aegon Life insurance Company put forward some of the salient features of this unique policy;
The Survival Benefits are calculated as a percentage of the sum assured.
Survival Benefits are paid at regular intervals during the plan tenure. There is a fixed interval when the benefits would be paid. Every plan has a different payout structure. Similarly, the percentage of Sum Assured paid as Survival Benefits is also not fixed and varies between different plans.
If the plan matures, the remaining portion of the Sum Assured (actual Sum Assured less the Survival Benefits already paid) is paid as maturity benefit. However, in case of death, the entire Sum Assured is paid irrespective of the money-back benefits already paid.
Take for example, person A purchases a money-back plan of Rs. 10 lakh for a tenure of 25 years and pays the premiums regularly. The plan promises survival benefits worth 2% after every 5 years of the plan, and on maturity 20% of the sum assured is paid along with the added bonuses.
Thus, A receives Rs. 2 lakh every 5 years, and at the end of the 20th policy year has received Rs. 8 lakh. On maturity, Rs. 2 lakh and the added bonuses will also be paid and the plan would terminate.
Now, taking into consideration the worst-case scenario A dies in the 18th year of the tenure. In such a case, Rs. 10 lakh will be paid to A’s nominee along with the due bonuses, irrespective of the fact that A has received Rs. 6 lakh as Survival Benefits.
The money-back policy provides with benefits like survival, death and maturity benefits, paid along with the bonus and the sum assured. However, the bonus depends upon the performance of the insurance company, and it is vital to take a look at the various components comprising the policy.
Similar to other investment tools, there are many Money-back policies available in the market for which it is advised to choose the right one based on your goals and after a thorough comparison.
LIC Money-Back Policy-20 years
Bajaj Allianz cash assure
SBI Life Money Back Gold
Aegon Life Regular Money Back Insurance Plan
Reliance Super Money Back Plan
LIC Money Back policy for children
Canara HSBC OBC Smart Stage Money Back plan