Money back plans protect your family’s financial interests from circumstances such as death or critical illness of the policyholder. Periodic payouts create wealth for meeting financial commitments at key stages in life.

A money back plan is a type of life insurance plan that allows the policyholder to receive payouts at regular intervals during the policy term as part of the survival benefit. Insurance companies offer a survival benefit as a reward for survival. While this benefit is availed at the end of the policy term in most life insurance policy types, the money back policy has the unique feature of providing regular payouts during the policy tenure, to the policyholder.

A money back policy installment plan that gives you some part of the maturity benefit in regular installments before the scheme period ends. The policyholder will receive regular payouts as long as he or she is alive, instead of a single lump sum at the end of the policy period or at death. However, once the death benefit payout is done or the maturity is reached, no further payments will be made through the policy. It is an investment-cum-insurance scheme which also has the advantage of liquidity after a few years. Money back policy is known as an Anticipated Endowment Plan in insurance parlance.

A money back plan is ideal for people who want a guaranteed return on their investments and are looking for regular payouts at the same time in addition to an insurance cover for themselves for the same money they are putting in as premium. Unlike a standard life insurance policy that only pays an amount after the maturity of the policy, the money back plan starts to pay an amount that is called a ‘survival benefit’ over the lifetime of the policy. This survival benefit is given after a few years from the start of the money back plan and continues until the maturity of the money back policy. The survival benefit, as the name suggests, is a reward from the company to the insured individual for surviving. This benefit is only payable if the insured is alive. In case of occurrence of an unfortunate event that results in the death of the insured party, these survival benefits do not accrue any more. In such cases, the nominee(s) receive the whole of the maturity amount, irrespective of how much survival benefits have been paid along with any bonus that may have accrued. Thus, the money back plan offers regular income along with a maturity benefit just like standard life insurance policies.

What are the key benefits of money back policies?

Certain benefits of money back policies are listed below:

• Money back policies offer survival benefits to policyholders during the policy tenure.
• At the completion of the policy term, policyholders are also eligible to receive a maturity benefit.
• Policy buyers can choose a sum assured as per their needs at the time of purchasing the policy. In case of an unfortunate eventuality, the death sum assured will be paid to one’s nominee.
• Policyholders can claim tax benefits for money back policies.
• Policy buyers can customise and enhance their base policy by purchasing riders that are offered by the insurance provider.

How are survival benefits different from the maturity benefit?

Survival benefits, which are unique to money back policies, are paid to the policyholder throughout the policy tenure. On the other hand, the maturity benefit is only paid at the completion of the policy tenure. Most life insurance policies, with the exception of term insurance plans, offer maturity benefits to policyholders.

What are the various premium payment modes that are offered under money-back policies?

The premium payment modes that are offered will vary based on the policy that you choose. However, the options that are commonly offered are the annual mode, bi-annual mode, quarterly mode, and monthly mode. Certain policies might also have a single pay option, wherein policyholders will have to pay the entire premium amount in a lump sum at the time of purchasing it.

What is not covered by a money back policy?

The most common exclusion for life insurance policies is suicide. For a full list of exclusions that are applicable to your plan, make sure to read the policy brochure.

What should I do if I am not happy with the terms and conditions of the policy that I have just purchased?

If you have just purchased the policy and are unhappy with the terms and conditions of the policy, you can choose to immediately return it to the insurer. All life insurance policies come with a free-look period, usually ranging between 15 days and 30 days. If policies are returned during the free-look period, the insurer will cancel the policy and return the premium that you paid after deducting a nominal amount for stamp duty charges and other such costs.

What are the tax benefits that are available for money back policies?

You can claim tax benefits for the premiums that you pay on a yearly basis under Section 80C of the Income Tax Act. Similarly, any payout that is offered by a life insurance policy is also eligible for tax deductions under Section 10(10D) of the Income Tax Act.

What is the minimum entry age for money back policies?

The eligibility criteria will usually vary from plan to plan and insurer to insurer. However, you will find the eligibility criteria for all plans in the respective policy brochure on the insurer’s website.

Do I have to undergo a medical screening before purchasing a money back plan?

A pre-policy medical screening may not mandatory for every policy buyer. However, certain insurance providers might require you undergo a medical screening to ensure that you don’t suffer from any adverse medical conditions. Pre-policy medical tests might also be required if you are opting for a high sum assured or are over a certain age. Regardless of whether you are required to undergo a medical test or not, you will be required to provide a declaration of your health at the time of purchasing the policy.

What does the term ‘surrender value’ mean?

The surrender value is a certain amount of money that is paid by an insurance provider to a policyholder if the latter decides to terminate the policy before the completion of the policy term.

Can I nominate more than one individual for the same policy?

Yes, you can choose to nominate multiple people for the same insurance policy. However, in this case, you will need to specify the percentage of the sum assured that each nominee will be eligible to receive in case of an unfortunate eventuality.

Does my age affect the premium I would need to pay for a money back scheme?

Age is a major factor in all insurance schemes. The older you are, the more premiums you will have to pay.

Is there a grace period for paying premiums?

Yes. Most insurance companies will give you 15 to 30 days extra after the due date to make premium payments. If you still do not pay the premium, the policy will lapse after a couple of months, and you will have to pay late fees to revive it.

Can I nominate more than one person for my policy?

Yes, you can. The number of people you can nominate depends on the insurance company. You can also change the nominees whenever you want.

Can I transfer my policy to my spouse’s name?

No, you cannot. No life insurance scheme allows transfer of the policy from one individual to another.

If I surrender my policy, will I get any money or will I lose the premiums I paid till then?

The surrender value of a policy is different from the sum assured, and is much lower. Usually, you cannot surrender a policy until at least 3 years are over.

Can I avail a loan against a money-back policy?

You can only avail a loan against your policy if it has acquired a surrender value. Insurance policies only acquire a surrender value if the policyholder pays all due premiums on a regular basis for a minimum period of 2-3 years. Thus, once your policy has acquired a surrender value, you can take a loan against it. However, keep in mind that this might vary as per your insurer’s terms and conditions, thus make sure to read through your policy brochure to know if you are eligible to avail a loan.

How is a money-back policy different from an endowment policy?

Both money-back and endowment policies offer you the dual benefits of a savings tool and a comprehensive life insurance cover. The key difference between these two types of policies is the way in which the benefits are paid out. In the case of endowment plans, you will receive a payout, called the maturity benefit, in a lump sum at the end of the policy tenure.

On the other hand, money-back policies also provide regular payouts to the policyholder, in the form of survival benefits. Thus, a certain percentage of the maturity benefit will be paid out on certain policy anniversaries. In addition to this, the policyholder will also receive a lump sum payout at maturity of the policy. You can opt for any one of these two policies based on your financial needs.

What does the term ‘policy lapse’ mean?

A life insurance policy is a long-term contract. Thus, policyholders are required to pay premiums on a regular basis in order to maintain their life cover. If you don’t pay your due premium amount within the end of the grace period, your insurance policy could lapse. A lapsed policy will not provide insurance coverage to the life assured. Even if your policy has lapsed, you can revive the policy within a period of 2-5 years, based on your insurer’s terms and conditions, by paying the due premium amounts with interest and providing a certificate of continued insurability.

What should I do if I lose my policy document?

If you lose your policy document, you will have to notify the insurer about the same as soon as possible. The insurer will provide you a duplicate policy document, but might charge you a nominal penalty for the same.

What is a ‘rider’ in insurance?

The coverage provided by a life insurance policy is more or less fixed. However, life insurance providers offer riders or add-ons that policy buyer can purchase along with their base insurance policy to enhance the coverage that they receive. Riders can be of many types, such as the Accidental Death and Disability Benefit Rider, Critical Illness Rider, Waiver of Premium Rider, etc. The exact number and types of riders available will vary from policy to policy and insurance provider to provider. Thus, policy buyers who wish to customize their policy can purchase these riders for an additional premium.

If I start smoking or drinking after purchasing an insurance policy, will there be any effect on my insurance cover?

In most cases, since the premium amount remains fixed for the duration of the policy tenure, there won’t be any changes to the premium payable, even if you start smoking or drinking after purchasing the policy. However, if the policyholder were to meet with an untimely death as a result of one of these habits, the insurance provider could deny the claim. Also, when you renew your insurance policy, you will have to declare that you are smoker. You might then be asked to pay a higher premium for your insurance cover.

How much life cover should I opt for at the time of purchasing my insurance policy?

When you purchase a life insurance plan, it is necessary that you opt for a suitable sum assured. Opting for a sum assured that’s too less will not help your dependents in case of an unfortunate eventuality, and opting for a sum assured that’s too high will leave you being over-insured and paying a high premium. Before you opt for the sum assured, make sure to consider the following factors:

• Your needs, liabilities, and financial goals
• The needs and lifestyle of your dependents
• Your premium payment capacity
• Human Life Value
• Inflation

How do I revive an insurance policy that has been lapsed for over a year?

If you wish to revive a lapsed insurance policy, you will have to immediately contact your insurance provider. Most insurers give policyholders the option of reviving their policy within a period of 2-5 years from the date of the first unpaid premium. In most cases, in order to revive a lapsed policy, you will have to submit a written request to your insurance provider. You can then pay your due premiums with the applicable interest charge and submit proof of continued insurability/good health, if required. Post this, your insurance provider will decide if the policy can be revived or not.

Can I return/cancel my insurance policy during the free-look period, and will I get a full refund of the premium paid?

Yes, you can return your insurance policy during the free-look period. Policy buyers are offered a free-look period when they first purchase an insurance plan to go through the policy terms and conditions and decide if they find the policy satisfactory. If you choose to return your insurance policy during the free-look period, your insurer will refund the premium you paid. A nominal deduction may be made from the premium amount that you initially paid.

What is the eligibility criteria for money-back policies?

Insurance providers set eligibility criteria, usually with regard to the age limits, for insurance policies, which prospective customers need to meet in order to be eligible to purchase the policy. The pre-defined eligibility criteria will vary from policy to policy. Thus, make sure read the policy brochure to know if you meet the eligibility criteria set by the insurer for that particular policy.