Money Back Policy
A money back policy is a type of life insurance plan that offers periodic returns during the policy tenure, along with life cover. Unlike a traditional term insurance, it provides a combination of protection and liquidity, as a percentage of the sum assured is paid at regular intervals. This makes it useful for meeting short-term financial needs while ensuring long-term security. It’s a suitable choice for those who want both insurance coverage and assured payouts. Additionally, the survival benefits and maturity amount can help support major life goals like a child’s education or retirement needs.
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Highlights
of Money Back Policy
Most popular Money Back Plans
Low-risk, non-linked money-back policies offer guaranteed returns at regular intervals.
Earn period pay-outs at regular intervals throughout the policy tenure.
Receive higher returns in the form of bonuses, such as a revisionary bonus, or terminal bonus that are added to your policy over time
Premium paid is tax-exempt~ up to 1.5 lakh annually under Section 80C of the Income Tax Act of 1961
Low-risk, non-linked money-back policies offer guaranteed returns at regular intervals.
Earn period pay-outs at regular intervals throughout the policy tenure.
Receive higher returns in the form of bonuses, such as a revisionary bonus, or terminal bonus that are added to your policy over time
Premium paid is tax-exempt~ up to 1.5 lakh annually under Section 80C of the Income Tax Act of 1961
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Money back Policy - Everything you Need to Know
Components of Money Back Policy
What is Money Back Policy
It is a type of insurance plan where the insured gets a portion of the money regularly instead of a lump sum at the end. It helps build savings with liquidity and low risk, providing maturity benefits as survival payouts throughout the policy period.
How Does Money Back Policy Work
The policy functions as an investment, offering returns to the insured. If the policyholder passes away during the term, the nominee receives the maturity benefit.
Key Features of Money Back Policy
A money back policy offers the twin advantage of life insurance protection and regular liquidity. Unlike a pure term plan, it ensures that the family remains financially secure in case of an unfortunate event, while also providing periodic payouts during the policy tenure.
A fixed percentage of the sum assured is paid to the policyholder at pre-defined intervals. These payouts make it easier to manage short-term expenses such as EMIs, lifestyle needs, or planned goals.
In case of the policyholder’s demise during the policy period, the nominee receives the full sum assured, irrespective of the survival benefits already paid out. This ensures comprehensive protection for the family.
At the end of the policy term, the policyholder receives the remaining sum assured along with any applicable bonuses. This maturity payout can help fund significant financial goals such as retirement planning, investments, or children’s education.
Many money back policies are participating plans, meaning policyholders are entitled to bonuses declared by the insurer from time to time. These bonuses enhance the overall returns and make the plan more rewarding over the long run.
Policyholders can avail a loan against their money back policy once a certain lock-in period is over. This feature ensures liquidity in times of need without having to break long-term investments.
Premiums paid for a money back policy qualify for tax deductions under Section 80C of the Income Tax Act. Additionally, the death and maturity benefits received are exempt from tax under Section 10(10D).
Money back policies come with flexible tenure and sum assured options, making them suitable for different life stages. Whether you are planning for child plans, marriage expenses, or retirement, these policies can be tailored to align with your goals.
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How Does a Money Back Policy Work?
A money back policy is designed to give you both insurance protection and periodic income during the policy term. Unlike a term plan that only provides a death benefit, this policy pays a portion of the sum assured back to you at regular intervals, called survival benefits. At maturity, you receive the remaining sum assured along with bonuses (if any). If the policyholder passes away during the tenure, the nominee still gets the full sum assured, regardless of the payouts already made.
Example:
Ravi, a 35-year-old professional, buys a 20-year money back policy with a sum assured of ₹10 lakh. Here’s what happens:
Every 5 years, he receives 20% of the sum assured (₹2 lakh) as a survival benefit. This helps him take care of expenses like his child’s education or vacations.
At the end of 20 years, Ravi gets the remaining ₹2 lakh plus any applicable bonuses as his maturity benefit.
If something unfortunate happens during the policy term, his nominee will receive the entire ₹10 lakh, even though Ravi has already received periodic payouts.
Who Should Buy a Money Back Plan?
A money back plan is well-suited for individuals who want the combined advantage of life insurance protection and periodic returns. It is ideal for:
Differences between Money Back Policy and Fixed Deposit
| Feature | Money Back Policy | Fixed Deposit (FD) |
| Nature of Product | Life insurance plan offering both protection and savings | Pure investment plan with no insurance component |
| Returns | Periodic survival benefits + bonuses (if declared) | Fixed, pre-decided interest rate |
| Risk | Low to moderate, backed by insurer and regulatory norms | Low risk, market-independent |
| Liquidity | Regular payouts at fixed intervals + loan facility available | Withdrawals possible but attract penalty on premature exit |
| Tax Benefits | Premiums eligible under Section 80C; maturity and death benefits may be tax-free under Section 10(10D) | Only tax-saving FD qualifies under Section 80C; interest earned is taxable |
| Maturity Benefit | Balance sum assured + accumulated bonuses | Principal + interest at maturity |
| Objective | Long-term savings, family protection, and periodic income | Short-term wealth creation and savings |
| Suitability | Ideal for those seeking insurance + guaranteed returns + liquidity | Best for conservative investors wanting only safe returns |
How to Raise a Claim Under a Money Back Policy
During the policy tenure, survival benefits (a percentage of the sum assured) are automatically credited to the policyholder’s account at pre-defined intervals. No separate claim is required, though the insurer may ask for basic documents like bank details or KYC updates.
At the end of the policy term, the policyholder is entitled to receive the remaining sum assured along with any bonuses. To initiate the claim, the insured must submit the original policy document, a discharge form, valid KYC proofs, and bank account details. After verification, the insurer credits the amount directly to the account.
In case of the policyholder’s demise during the policy term, the nominee can file a death claim to receive the full sum assured, regardless of any survival benefits already paid. Required documents include the death certificate, completed claim form, proof of relationship with the deceased, and the original policy document. Once verified, the insurer processes the payout.
How to Choose the Best Money Back Policy
Opt for a sum assured that can adequately protect your family’s future expenses such as education, healthcare, or outstanding loans.
Review when and how much survival benefit is paid. For example, shorter intervals may help with recurring expenses, while longer gaps work better for big milestones like higher education or home purchase.
Enhance protection by adding riders such as accidental death, critical illness insurance, or waiver of premium. This ensures your policy covers not just life risk but also unforeseen financial shocks.
Don’t just go for the lowest premium. Evaluate whether the combination of survival benefits, maturity value, and bonuses justifies the cost.
A strong claim settlement ratio, financial strength, and track record of bonus declarations are critical indicators of long-term reliability.
Choose a tenure that aligns with life events - like a 20-year policy for child education or a shorter one if you want liquidity before retirement.
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Benefits of Money Back Policy
A money back policy provides three keybenefits of maturity, survival and life coverage, making it a valuable investment and insurance instrument. The key advantages include:
It acts as insurance to support the family’s financial needs in case of untimely demise of the insured.
In case of sudden death of the insured during the policy term, the nominee receives the death benefit. If the insured outlives the money back policy, they get survival payments on maturity.
Guarantees regular intervals of money back, unaffected by market changes, making it a secure investment.
The insured receives regular income within a short period of policy initiation.
The policyholder receives bonus that is accrued annually and given at maturity for major expenses.
The insured is eligible for tax deductions under Section 80C of the Income Tax, with tax-free sum assured.
Components of Money Back Policy
There are many components of money back insurance plan that a policyholder receives during and after the tenure of the policy. These include:
Regular payouts received by the insured throughout the policy term. For example, in a 20-year policy, you may receive survival benefits every five years starting from the 5th year.
The nominee receives the sum assured and accrued bonus if the insured passes away during the policy.
Total amount paid to the insured at maturity, including sum assured, pending survival benefits, and bonus.
The insurer pays a bonus based on policy performance, including reversionary and terminal bonuses.
Riders in Money Back Policy
Riders are optional add-ons that enhance the coverage of your money back policy by offering protection against specific risks. Some common riders include:
Provides an additional payout if the insured dies due to an accident.
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Offers financial support in case of permanent or partial disability caused by an accident.
Pays a lump sum amount if the insured is diagnosed with a listed critical illness such as cancer or heart disease.
Waives off future premium payments in case of disability or loss of income, while keeping the policy benefits intact.
Ensures regular income for the nominee in addition to the sum assured, in case of the policyholder’s death.
Factors Affecting the Premium of Money Back Policy
Your money back policy premium depends on factors like your age, medical history, chosen riders, and policy term. These are some things to keep in mind:
You can adjust your premium based on the desired payout for beneficiaries as per financial requirements.
Longer tenures may have lower premiums.
This is aligned with the policy term and paying ability.
Adding riders increases coverage and premiums.
Younger age usually means lower premiums due to lower health risks.
Compare with Fixed Deposits
Money back policies offer more benefits than fixed deposits. They are investment plans with guaranteed returns and life coverage. Here are the main differences between FDs and money back policies.
|
Features |
Fixed Deposits |
Money Back Policy |
|---|---|---|
|
Tax benefit on premium |
|
48,800
|
|
Tax paid on return |
As per tax slab
|
No tax
|
|
Maturity value |
Guaranteed upfront
|
Guaranteed upfront
|
|
Life cover |
|
|
Documents for Buying Money Back Policy
To buy a money back policy, you will typically need to provide the following documents:
Address proof: Driving license/bank statement or passbook with latest entries/passport/voter ID/Aadhaar card/ration card
Identity proof: Aadhaar card/voter ID/passport/PAN card
Age proof: PAN card/ Aadhaar card /passport/voter ID card/marriage certificate/ration card/birth certificate/driving license
Photo: Passport-size photographs of the individual
Income proof:
- For high sum assured cases, income proof is also needed.
- Salary slips of last 3 months/income tax returns/employer certificate/latest bank statement/latest form 16
Ask Anything as We Have Answers to Everything in Insurance
A money back insurance policy is a kind of traditional life insurance plan that offers returns in the form of regular payment at intervals to the insured. This policy comes with double benefits since it offers both investment and insurance. Also, under this policy, the insured gets a lump sum amount at the end of the policy. Further, if there is any unforeseen situation like death of the policy holder, the nominee gets the lump sum amount.
The main features of a money back insurance policy are as follows:
- The policy offers guaranteed returns.
- It offers insurance cover together with investment option.
- It offers guaranteed returns on the maturity of the plan.
- Under this plan, the sum assured is available at the end of the term.
- The plan also ensures regular income through the policy lifetime.
- Also, the policy allows beneficiaries of the plan to receive a lump sum amount in case of the sudden demise of the insured.
Yes, riders are available with a Money Back Policy. They are namely:
- Critical Illness rider
- Accident rider
- Disability benefit rider
- Hospital cash rider
- Term rider
- Waiver of premium rider
- Accelerated sum assured rider
No, a money back policy doesn't pose much of a risk. Generally almost all kinds of investment products have some or the other risks involved. However, with a Money Back Policy, which is a kind of endowment plan, there is very low risk involved, while the returns are good.
Money back policies offer varied tax benefits which allows the policyholder to reduce tax liability. Under this policy, if the insured pays five times or more premium than the maturity amount he/she receives, then the amount gets exempted from tax.
Anyone can buy a money back policy. If you are interested in investing in a policy that poses low risk and offers insurance coverage, money back is the best policy for you. Hence, you can create wealth and cover life under a money back policy.
If someone misses paying their premium for the policy, they can pay the amount during Grace period. However, if the person misses the grace period and doesn't make the payment of the premium then the policy is likely to get lapsed. However, if the insured buys the rider called premium waiver, in that case the policy will be saved.
As such, there is no premium payment frequency of the Money Back plan. It can be on a quarterly, semi-annual or annual basis depending on the insurer.
Advantages of a money back insurance policy are:
- It provides a triple benefit of maturity, survival and life coverage.
- The policy offers regular payouts during the term of the plan.
- It serves the dual purpose of insurance and investment.
- The plan offers guaranteed returns.
- It allows Tax benefits.
- It is a low risk plan.
- Several riders are available with this plan.
Absolutely. In case of an unfortunate event, the nominee receives the entire sum assured, regardless of the survival benefits already paid.
Yes. The survival benefits and maturity value are guaranteed, and on top of that, you may also receive bonuses if declared by the insurer.
Yes. Many money back policies provide a loan facility after a minimum lock-in, so you can access funds without breaking your savings.
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