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    What is Money Back Policy? It’s unique features and benefits

    Last Updated On 02-02-2023

    What is Money Back Insurance Policy

    Money back insurance policy is a special form of life insurance policy where the insured receives a part of the sum assured as a regular installment rather than receiving a lump sum at the end of the policy period. In fact, money back insurance policy acts as an endowment scheme with liquidity.

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    What is Money Back Insurance Policy

    Money back insurance policy is a special form of life insurance policy where the insured receives a part of the sum assured as a regular installment rather than receiving a lump sum at the end of the policy period. In fact, money back insurance policy acts as an endowment scheme with liquidity.

    Money Back Policy Meaning

    As the name suggests, this policy provides money back at regular intervals (usually in installments after a few years). The installment amount, which is also called ‘Survival Benefits’ is a certain percentage of the sum assured.

    The remaining sum assured is paid back on maturity with consigned bonuses. In case of the death of the insured during the policy tenure, the full sum assured is paid regardless of the Survival Benefits already paid.

    How Money Back Policy Works

    Let’s take an imaginative scenario to understand the work process of money back policy. Mr. Sharma purchases a 20-year money back policy with a sum assured of Rs. 20 lakhs. The plan offers 20% survival benefits every 5 years from the purchase date.

    Now, Mr. Sharma shall receive Rs. 4 lakhs in the 5th, 10th, 15th and 20th year of the policy. In addition, in the 20th year, he shall also get the remaining Rs. 4 lakhs coupled with vested bonuses and the plan will terminate.

    If Mr. Sharma passes away in the 15th year of the policy, then the nominee shall receive the entire Rs. 20 lakhs although Mr. Sharma already availed Rs. 12 lakhs as Survival Benefits.  

    Why do you Need a Money Back Policy?

    Money back plan is kind of a saving plan as it provides a guaranteed return on investments along with a regular monthly payout. At the same time, these policies offer insurance coverage. So, this is an excellent choice for those individuals who want security and income in tandem.

    In this unpredictable world, things may go awry at any time and you may face financial constraints.  When you have a secured income flow at regular intervals along with life insurance coverage it gives you peace of mind and acts like a shield during any financial hardship.

    Hence, the money back insurance policy is something that may build a corpus for your growth and prosperity.   

    Features of Money Back Insurance Policy

    Money back plan is like a double-edged sword—it is an investment and insurance option at the same time. Some features of this plan are enumerated below:

    • Guaranteed Returns from a Money Back Plan

    This plan is an ideal fit for people who are looking for a safe and secure investment irrespective of the market condition at any given point of time. The money is returned to the policyholder either as a survival benefit or to the nominee in case of early demise of the policyholder.

    • Income During the Lifetime of the Money Back Plan  

    Money back plan ensures guaranteed returns throughout the lifespan of the policy. The survival benefits accrue regularly and are paid to the policyholder after every few years (specified in the terms & conditions). This covers the cost for unforeseen large expenses that may happen at any time. The person can also use the fund for a family holiday, to pay off loans, to buy an apartment or simply for savings purposes. Therefore, this policy is unparallel to any other common policy currently available in the market.

    • Income on Maturity of the Money Back Plan

    Money back policy also offers a lump sum amount to the policyholder after the maturity period. This end benefit is guaranteed and always communicated upfront. Hence, the plan covers your life and provides a definite return as well as a sum assured.

    • Income on the Death of the Insured Person in a Money Back Plan

    The nominee of the policy receives the sum assured even if any unfortunate event happens to the policyholder inside the policy tenure. This includes the applicable bonus as well; reversionary or additional. Hence, the money back policy acts like a life insurance plan that takes care of the financial well-being of the family members even if the policyholder is not around.

    • Bonus Amounts Help Increase Payout in a Money Back Policy

    By nature, the policy increases the benefits for the insured through an additional bonus. Every year the insurance provider declares the bonus as a percentage of the sum assured. This bonus is added to the overall amount on maturity of the policy. However, the bonus amount is subject to regular & timely payment of the premium by the policyholder.

    • Add on Riders Available for the Insured to Increase Their Cover

    ‘Add on’ as the name suggests, is a means to increase the coverage of your policy. Insurance providers allow the policyholder to choose several add-on riders like critical illness, personal accident or a term rider in exchange for a higher premium. Experts say that an ideal money back plan comprises assured returns, more add-on riders, lower risk and additional tax benefits.

    Advantages of Money Back Policy

    Following are the advantages of money back policy.

    • Returns Accrue Only After a Few Years

    This is one of the best parts of a money back plan. Sometimes, the policy term can be long like 15 to 20 years. In that case, insurance providers pay the accrued sum in every few years. Usually, the accrual payment interval is specified.

    • Value of Money Higher with a Money Back Policy

    Being an insurance coverage in nature, a money back policy offers good value for money. The policyholder receives money in 3 ways: the survival benefits, the sum assured on maturity, and the bonus. The survival benefits are usually paid in regular intervals and bring higher value for the users compared to if the lump sum amount would be paid only after the maturity.

    • Insured Receives the Full Sum Assured on Maturity

    The policyholder always receives the full sum assured on maturity irrespective of the amount he/she already availed as survival benefits. On top of that, an additional bonus is paid along with the sum assured that increases the total money.

    • Insurance Cover at the Same Time as Investment Returns

    Quite a few other investment plans offer returns at the end of the investment period or over the lifetime of the policy. However, only the money back life insurance policy provides several advantages like survival benefits, maturity benefits with bonus and insurance cover.

    • Bonus at Maturity Significantly Increases the Overall Payout

    There are two types of bonuses provided with the money back plan: Simple Reversionary bonus that is declared at the end of each year and added to the overall sum that the policyholder receives at the maturity period. Compound Reversionary is when the declared bonus for the current year is added to the sum assured instantly and the next year’s bonus calculation is done on the already increased amount.

    • Counter Vitality of Market-Linked Investments

    A money back policy should be a part of an individual’s investment portfolio to counter the volatility of the market-linked investment like stock or commodity market. Due to the guaranteed nature of the return, it provides an effective cushioning against loss of income from other investments.

    • Secure Investments with a Money Back Plan

    This policy ensures that the insured gets his or her sum assured back no matter what the market condition is. Hence, it is a good way to make your investment portfolio secure. Moreover, the money back plan supports if suddenly you need a certain amount of money in the future—thanks to the survival benefits payout.

    • Tax Savings with a Money Back Plan

    The policy premium qualifies for tax deductions (up to a specified limit) under section 80C of the Indian Income Tax Act, if the premium is less than 10% of the sum assured. Additionally, if the sum assured is 5x higher than the premium it is exempted from tax at source deduction.

    Benefits of Money Back Insurance Policy

    • Survival Benefits

    Survival benefits are money paid to the policyholder after every few years. These benefits continue till the very end of the policy tenure. The amount is determined as a certain percentage of the sum assured and spread across the policy period.

    • Death Benefits

    If any unfortunate event happens to the policy owner, the nominee(s) receives the sum assured including the bonus accrued. However, the death benefit does not include survival benefits as those are paid only if the insured is alive.

    • Maturity Benefits

    On the maturity of the money back plan, the insured is rewarded with maturity benefits that include the sum assured, the remaining survival benefits as well as all accrued bonuses.

    • Tax Benefit

    As per section 80C of the Indian Income Tax Act, if the policy premium is less than 10% of the sum assured it qualifies for tax deductions. Moreover, there is no tax deduction at source if the sum assured is 5 times higher than the premium paid.

    Common Optional Covers or Riders Available in a Money Back Policy

    • Critical Illness

    In the event of any critical illness, the insured gets a cash sum if a critical illness rider is taken with the money back policy. The amount can be used to pay medical bills or for any other reason. Common critical illnesses that are covered include:

    • Heart attacks or bypass surgery
    • Cancer
    • Paralysis or strokes
    • Major organ transplant
    • Kidney failure

    • Accident or Disability Benefit Rider

    This rider is very helpful if any unexpected costs arise from an accident that may lead to disability (partial or permanent) or death. The amount paid is determined by the severity of the injuries. Insurance providers pay part of the sum assured for any disability or the full sum assured in case of an unexpected happening.

    • Waiver of Premium

    This rider is a bliss for people who are unable to pay the premium for any inconvenience. Even if the premium is not paid, the insured does not lose insurance coverage due to this rider.

    • Accelerated Sum Assured

    As the name suggests, this rider helps the insured to get the sum assured without paying the premium or waiting for the whole term of the money back plan to get the insurance amount.

    • Term Rider

    This rider is more or less similar to a term life insurance policy. The policyholder can take this rider to make sure that the nominees get the term insurance payment even if he or she is not around.

    • Hospital Cash Benefit Rider

    If the insured is admitted to the hospital for a minimum of 48 days, this rider helps to get daily cash to meet the hospital expenses. Cash benefit rider also covers the cost of surgeries and ICU stay.

    What You Need to Know Before Buying a Money Back Policy

    • Understand What a Money Back Plan is?

    A money back plan is an endowment policy with a guaranteed return option throughout the entire lifetime of the plan. An endowment policy offers a higher maturity benefit compared to a money back policy. However, money back policy is unique in several ways. It offers survival benefits, maturity benefits at the end of the policy, two types of bonuses and insurance cover.

    So, considering the inflation, CPI/WPI, return value and guaranteed nature, money back policy is a good option to choose from.

    • Understand What a Money Back Plan is Not?

    Many people mix up money back plan with a pure investment option. Money back is a life insurance policy with a guaranteed return starting after a few years of the purchase date, sum assured at maturity along with the applicable bonus.

    It is not a full-fledged investment option so unlike other investment options i.e., stock market/bond market it doesn’t offer a risky yet higher return. Rather it provides you with a steady and guaranteed income flow irrespective of the market conditions.

    • Understand the Concept of Risk of Money back Policy

    Traditional market investments like stocks, bonds or mutual funds are risky due to the volatility of the market. You can gain higher returns at times or lose the entire investment amount at times. Money back policy eliminates the ‘risk’ portion of your investment. While the return may not be as high as other market-linked investment options, it ensures a guaranteed income flow throughout the entire tenure of the policy.  So, if you are after a safe & secure return this is one of the best options for you.

    Frequently Asked Questions

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    Is it Risky to Invest in Money Back Policy?

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    No, it is not risky to invest in a money back policy as it offers guaranteed income throughout the lifecycle of the policy.

    What is a Child Money Back Plan?

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    This is an insurance cum investment plan that is used to safeguard the financial needs like education, wedding, etc. of a child as they turn 25 years old. This plan offers survival benefits as well as risk cover for children. 

    What are the Tax Benefits of Money Back Plans?

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    With a money back plan, you can lessen your tax liability. The sum assured is exempted from tax if the maturity amount is 10 times the annual premium.

    What Are the Eligibility Criteria to Buy Money Back Policy?

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    First and foremost, the person should be an Indian National with a regular source of income (employee or self-employed). The entry age barrier is 18-60 years for an employee and for self-employed the maximum entry age is 65 years. 

    What If I Fail to Pay My Money Back Policy Premium?

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    A grace period generally upto 30 days (15 days in case your premium payment mode is monthly) is allowed if you can’t pay the premium for any reason. If you fail the 2nd time, the policy will lapse.

    How Frequently Do I Have to Pay Money Back Policy Premium?

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    The premium paying frequency is flexible. You can choose any from annual, half-yearly, quarterly or monthly options.

    Is the Amount Received Through Money Back Policy Taxable?

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    The amount received through money back plan is tax-free under section 10(10D) of the Income Tax Act, 1961.

    How to Surrender My Money Back Policy?

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    To surrender the policy, you must go to the insurance company’s branch office or directly talk to an agent as there is no option for online surrender.

    Which is the Best Money Back Policy?

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    The best plan is the one that provides a higher sum assured, good survival benefits, and a grace period if any premium payment is missed.

    Disclaimer:

    The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.

    PNB MetLife India Insurance Company Limited Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka
    IRDAI Registration number 117 | CIN U66010KA2001PLC028883

    Terms & condition apply, Benefits stipulated are subject to premiums paid and policies in-force. For more details on risk factors, please read the sales brochure and the terms and conditions of the policy, carefully before concluding the sale. Tax benefits are as per the Income Tax Act, 1961, & are subject to amendments made thereto from time to time. Please consult your tax consultant for more details. Goods and Services Tax (GST) shall be levied as per prevailing tax laws which are subject to change from time to time. The marks "PNB" and "MetLife" are registered trademarks of Punjab National Bank and Metropolitan Life Insurance Company, respectively. PNB MetLife India Insurance Company Limited is a licensed user of these marks.

    Call us Toll-free at 1-800-425-6969, Phone: 080-66006969, Website: www.pnbmetlife.com, Email: indiaservice@pnbmetlife.co.in or Write to us: 1st Floor, Techniplex -1, Techniplex Complex, Off Veer Savarkar Flyover, Goregaon (West), Mumbai – 400062, Maharashtra. Phone: +91-22-41790000, Fax: +91-22-41790203.

    Beware of Spurious Phone Calls and Fictitious / Fraudulent Offers!
    IRDAI is not involved in activities like selling insurance policies, announcing bonus or investments of premium. Public receiving such phone calls are requested to lodge a police complaint.

    AD-F/2022-23/557

     

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    Disclaimer

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    As your trusted life insurance partner, PNB MetLife is with you amidst the current COVID-19 outbreak. Our policies also cover COVID-19 Claims. In case of a Death Claim, kindly submit the signed Claim Intimation Letter mentioning the policy number, brief of the insured event and other claim documents on the email mentioned herewith. Please write-in to us at claimshelpdesk@pnbmetlife.com or indiaservice@pnbmetlife.co.in. You can also call us on 1800-425-6969 for death claims intimations and for any queries on Monday - Saturday between 10:00 am - 7:00 pm.

    PNB MetLife Insurance, amongst the trusted Life Insurance companies in India, aims to provide a wide range of Life Insurance products that suits the needs of an individual at every stage of his life. Life Insurance Plans range from Term Life Insurance PlansTerm PlanProtection PlansLong Term Savings Plans , Retirement Plans & Child Education Plan.

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