The money back policy encourages the savings habit and also pays an income at periodic intervals. We explore the benefits of buying it.
Buying life insurance is a way of securing your own and your loved ones’ financial future. In the face of rising living costs, inflation, and the possibility of an untoward incident robbing the family of its regular income, life insurance comes as a veritable godsend.
There are several categories of life insurance policies. The most common types are the endowment, term and money back plans. It is worth your while to buy a money back policy for these 3 reasons:
#1 The survival benefits are paid periodically.
The biggest benefit of the money back plan is that it pays survival benefits in the form of periodic income to the policy holder. You are aware of the frequency of the pay-out beforehand. This means that the pay-out can help you plan and execute short term goals. For instance, you might want to pay a semester’s fees for your child’s education after a year. Or make a down payment on a new two-wheeler in a few months. Or you can save a few of the pay-outs and make a large repayment on an existing loan. The periodic income brings many goals within reach. Do note that the survival benefits are counted as a percentage of the sum assured.
#2 In case of policy holder’s untimely death, the entire sum assured is paid irrespective of money back benefits.
After paying the survival benefits, the plan matures at some point. When it reaches maturity, the money back life insurance plan pays the sum assured after deducting the survival benefits already paid. But in some cases, the policy holder may unfortunately not be present at the time of plan maturity, i.e. they might pass away while the plan is still active. In this case, the insurance provider pays the entire sum assured to the policy holder’s nominated family member(s) irrespective of how much survival benefit has already been paid. The money back policy is usually a participating plan with bonuses added – the accumulated bonus is then paid on plan maturity or death of the insured.
#3 The plan offers rider contingency as well.
There are several riders that you can avail of under the money back plan. Rider benefits are not clubbed together under the sum assured or the survival benefit pay-out. Instead, the rider benefits are paid as a lump sum amount when the contingency covered by it takes place while the plan is still active. For instance, there may be a rider for accidental death, or another for disability that prevents a person from working. There may even be a critical illness rider.
Thus, the money back life insurance plan helps you plan different life stages. Policy holders are also liable to get tax benefits under Sec 80C against the premiums paid.