Saving money to secure your future is certainly an important financial requirement. There are different financial instruments to ascertain such benefits for your financial advantage. And, when you are the sole earning member of your family, you should ensure enough financial resources to secure their future in your absence. Is there a definite way to have a life cover and receive fixed returns during the policy term? Well, yes! Let us get ahead to find out! 

What Is A Money Back Policy?

A money-back policy is a savings insurance plan that provides a life cover and a guaranteed fixed return during definite intervals through the policy term. The money-back is paid to you during the policy term and is a certain percentage of the sum assured. 

On maturity, the remaining portion of the sum assured and accrued bonuses will be provided to you by your insurer. And, if you meet with an unexpected demise during the policy term, your nominee will receive the lump sum death benefit irrespective of the money-back received during fixed intervals of the policy tenure.  

How Does The Money-Back Policy Work?

Here is a simple example to help you understand how a money-back savings policy works. 

Consider that Mr. Naresh purchases a money-back policy of ₹20 lakhs for 25 years and pays annual premiums. According to the money-back plan, the insurer will provide 20% of the sum assured every 5 years. 

The money-back policy will provide ₹4 lakhs every 5 years. Therefore, he will receive ₹4 lakhs in the 5th year, 10th year, 15th year, and 20th year. And, on maturity, he will receive the remaining ₹4 lakhs with accrued bonuses. 

And, if Naresh meets with an unexpected death during these 25 years, his nominee will receive the sum assured of ₹20 lakhs irrespective of the money-back payouts received during the policy tenure. 

Benefits Of A Money-Back Insurance Policy

Money-back insurance policy is one of the most beneficial savings policies that provide financial security to people with several financial commitments. Here is a detail about it:

• Guaranteed fixed money-back returns – The money-back plan offers guaranteed returns at fixed time intervals. You can utilize the funds to pay for your personal or financial commitments, such as your higher education, child’s tuition fees, etc. It will help you reduce your financial burden to a considerable extent.
• Help fix short-term emergencies – When you keep getting a financial resource every fixed time interval, you can manage short-term emergencies if they arise and protect your savings or other investments that require to be broken. 
• Life cover – The money-back policy provides the life cover apart from the guaranteed returns. Therefore, it is a valuable savings insurance plan to combine the benefits to secure the financial future of your loved ones while ensuring savings to your advantage.
• Tax benefits – The money-back policy plan will also qualify for the tax deduction and exemption benefits under Section 80C and Section 10(10D) of the Income Tax Act, 1961, based on the terms and conditions. 
• Secure returns – As the returns from the money-back plan are not market-linked, they are secure and available for your benefit through the policy term. It is completely risk-free. 
• Liquidity and additional bonus – As the returns are provided to you at fixed intervals through the policy term, it is high in liquidity. Also, the plan provides additional bonuses based on your insurer’s performance and policy conditions.
• Riders – As money-back plans are savings insurance plans, they come with optional riders. You can utilize it to enhance the policy benefits. 
• Flexible features – Insurers provide flexible features to customize the money-back policy to suit your financial needs. For instance, the Tata AIA savings plan provides savings and life cover benefits by letting you pay the premium for a limited term while ensuring the benefits throughout the policy term.

Conclusion

Insurers provide different savings insurance plans to provide life cover and guaranteed returns. Money-back plans are savings insurance plans that provide a portion of the sum assured at regular intervals through the policy term and the remaining sum assured on maturity. However, your nominee will receive the lump sum death benefit in your unexpected demise, irrespective of the money-back payouts. Therefore, a money-back policy plan is ideal if you want to secure your family’s future while receiving a certain sum through the policy term to pay for any short-term emergencies or money goals!