Money back plans are ideal for those who are looking for a product that provides both - insurance cover and savings. You may also go in for this policy to utilize the tax-free sum of money receivable - to visit your favorite holiday destination, maybe. Or perhaps you can re-invest the amount.
In a money-back plan, you keep getting a percentage of the sum assured during lifetime of the policy. In case of the insurer outliving the term, he/she gets the remaining corpus with accrued options like bonus. In the event of his/her death before the full term of the policy, his/her nominee or legal heirs get the sum assured irrespective of the number of installments received, with accrued benefits.
There is an amount guaranteed to be paid out called the sum assured and this can be increased on the basis of investment performance through the addition of periodic (for example annual) bonuses. Regular bonuses (sometimes referred to as reversionary bonuses) are guaranteed at maturity and a further non-guarantee bonus may be paid at the end known as a terminal bonus.
In the event of death of the insured during the term of the policy, the nominee still receives the entire sum assured (even if the insured had received fixed portions of the sum assured), plus the bonus/participating profit/guaranteed addition, if any.
The premium for money back policies is higher in comparison to endowment and term plans. If one purchases money back plans with guaranteed addition, the premium is even higher. Some companies offer an option in choosing the premium paying term.
Money back policies are advisable if the insured wants a product that provides both - insurance cover and savings. Many people prefer to buy such policies to utilize the tax-free sum of money receivable to go on a holiday, re-furnish their homes or even re-invest the same amount
However, there are other ways to utilize this income. A substantial part of the premium paid for money back plans is used by the insurance company to generate the bonus or profit paid to the insured or the nominee. If one chooses to impose self-discipline and invest regularly, other saving/investment avenues, such as mutual funds, offer higher returns. Click here to learn why your insurance plan is not a good investment avenue as well.
Riders are additional benefits that can be purchased with a life insurance policy to spread the risk cover. Rider premiums can substantially add to the cost of the life insurance policy. The common riders include:
Accidental Death Benefit Rider
Accidental Disability/Dismemberment Benefit Rider
Critical Illness Benefit Rider
Guaranteed Insurability Option Rider
Hospital Cash Benefit Rider
Life Guardian Benefit Rider
Waiver of Premium Rider
Term Rider
