Money back plans combine the advantage of savings and also provide insurance cover. In such types of plans a certain amount of the sum assured is being given to the individual at regular intervals during the policy period. The balance amount is being paid during the maturity of the plan. If the policy holder dies during the policy period the nominee would get the sum assured as well as the bonus amount if any. Moreover the cash payout received at regular interval is exempted from tax. The amount of payout, terms of the policy, depends on the policy that one has opted. So one should compare money back policy and choose one that would best suit one’s needs.
Sometimes Money Back policies are considered similar to the endowment policies. However, the major difference between an endowment and money back policy is endowment policies do not provide returns at regular intervals. Only the survival benefits are paid at the time of maturity.
How does money back plan work?
Suppose a person takes a money back plan for 15 years with payouts of 25% of the total sum assured after every five years and rest of the sum assured at the end of the 15th year along with the additional bonus amount. So by the end of the 10th year the individual would have received 50% i.e. 25*2=50% of the total sum assured and on the completion of the policy term, the individual would have received 50% of the total sum assured plus any additional benefit if any announced by the insurance company at the time the policy was bought. The plan can also have higher term periods for ex: 20 or 25 years.
Features and benefits
There are a number of financial companies in India offering money back plans. Some of them are as follows: