What is a Money Back Policy?
A money back policy is a form of life insurance savings plan that helps you save your money and pays a percentage of the benefit back to you in regular intervals during the policy term. In a money back plan, some amount of the sum assured is paid out in the course of the policy tenure, also known as the survival benefit, while the rest of the sum assured will be paid out on maturity with any bonuses, if declared.
An important feature that sets money back policy apart from any other savings plan is that the sum assured and the accrued bonuses will be paid out as a death benefit, even if a certain amount of the sum assured has already been paid out during the policy term. However, this will only include the sum assured and bonuses accumulated only until the demise of the policyholder.
For a better understanding, let’s look into this example.
If Neerja buys a money back plan of 5 Lakh for 20 years, she will pay the premiums for 20 years and will start receiving the 15% of the payouts after the 5th, 10th, and 15th policy years. Hence, 45% of the sum assured will be paid out during the policy term, and on maturity, she will receive the remaining 55% along with any declared bonuses. But in case of her demise in the 18th year, her family gets the sum assured and bonuses accrued until the 18th year.