Want to Invest in a Money Back Plan? Here's What You Should Know

cioreviewindia Team | Monday, 25 October 2021, 13:53 IST

Want to Invest in a Money Back Plan? Here's What You Should KnowInvestors today have a variety of lifestyle necessities and financial securities that need to be reinforced by a steady inflow of funds. Due to the diverse economic landscape in India, many investors choose to grow their funds through direct equities and mutual funds. But in those cases, the risk is directly proportional to the return margins. An investor has to maintain a keen sense of market trends and fluctuations. One may lose a big investment in the event of an unforeseen market fall, which can jeopardize their financial stability.

A money back plan however, offers fund growth solutions and investment coverages to investors looking for low-risk alternatives. Investors that do not have a disposable corpus to invest usually go for a money back plan that yields significant returns with the added bonus of being tax free, customisable and earning survival benefits at tenure-based intervals. It is often considered a good fit for new, risk-averse investors.

A money back plan is one of the investment options that acts as an insurance instrument that promises recurrent survival benefits to a policyholder during the course of the policy when they survive for a given period of time. As one can gauge from the name of the policy, it revolves around the policy having to start giving frequent payouts to the surviving policyholder while also providing coverage while receiving premiums from them to maintain said coverage.

How It Works?

It operates like a general insurance policy, with the added benefit of being able to get one’s money back in staggered payments from their insurance provider is assured. A money back plan can be used to insure one’s children as well, where with the help of a Child Money Back Plan, an investor can secure their child’s future through survival benefits, assured sums and bonuses when they turn 25. 

Money back plans are great for those looking for long term corpus growth that can help a policyholder access basic life goals such as education, marriage, and a stable retirement which should not exhaust a person’s finances at their most vulnerable point in life. Knowing this reality, insurance providers have introduced investment options like money plans that promise guaranteed returns and on their investments in a manner best suited to them.

Benefits of Money Back Policy

A money back plan, has many provisions that make it popular amongst investors due to its high guaranteed returns and interval-based benefit payments. Therefore, let us read through the benefits of a money back policy:

Benefits of Money Back Policy1. Sum Assured: Under a money back plan there are certain types of assured benefits that are paid to the policyholder or their dependents during the tenure of the policy. The first being a survival benefit, which is the integral feature of the money back plan. As aforementioned, at designated intervals throughout the policy tenure, the policyholder will be paid survival benefits for surviving the policy term. The provisions stay the same for a child money back plan as well.

For example, if a policy tenure is 25 years long and the insured individual has decided on the payment intervals to be 5 years apart; the insurance provider pays the survival benefit to the insured on the 5th, 10th, 15th and 20th year of the policy. On the 25th year they shall receive a maturity benefit, along with the accumulated bonus and remaining survival benefit.

In the event that the policyholder passes before the tenure ends, the beneficiaries are given the death benefit sum assured along with bonuses, if any. Survival benefits are not paid with these plans as the terms require the amounts to only be payable if the insured survives.

2. Tax Benefits: Since a money back plan qualifies as an investment plan which is accessed by many, the premiums paid towards maintaining them are eligible for tax deductions under Section 80C of the Income Tax Act, 1961.

It is important to note however, that money back policy is only eligible for tax deductions if the premium being paid is less than 10% of the assured sum which is to be paid to the policyholder at the end of the tenure. This maturity benefit, when received is also exempted from taxation if it is at least 5 times the premium amount.

3. Insurance and Investment: Alongside survival and maturity benefits with bonuses, one also avails an insurance cover under a money back plan.

The policy provides an insurance coverage to the policyholder which is supported by the premium payments being maintained by the policyholder. It is also applicable for a child money back plan as well. A money back plan provides coverage while having pre-existing payments and benefits within the plan making it a great choice for investors who require triple coverage for all situations.

4. Low Risk: A money back plan is a great option for investors who want to grow their capital, but do not want to engage with market-linked instruments that may be subject to fluctuation. Therefore, as an investment plan that has recurrent survival benefits paid to the investor, it can be an investment system that has funds growing simultaneously while also gaining their money back with significant return margins.

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