Traditional Plans have proved to be a difficult point for any investor when the question of liquidity arises. Thus the Money Back Plans has proved to be a more lucrative option for investors as this keeps paying back a certain amount at certain intervals for you to cater to your and your family’s financial needs during the term of the policy. To choose the best money-back plans in India, you need to understand the entire working of a money-back plan.
How does a Money-back Plan Work?
A Money-back plan is a plan where the insured person keeps getting the benefit equally distributed throughout the term of the plan. This benefit is an equal portion of your sum assured that is divided in a certain percentage and is given back to you at a certain interval and the leftover sum assured is again given back at the end of the term. It is a non linked participating plan, and the bonus is declared on the sum assured by the insurance company as per the performance of the company. These bonuses are vested and are given to the policyholder on the survival of the term.
So, if you happen to die within the policy tenure, the death benefit is paid irrespective of the amount of survival benefit that he has already received. This means that if you have opted for a 20 year term and have received survival benefits on the completion of 5, 10 and 15 years respectively and then die after the 15th year. Even in that case, your entire death benefit would be paid to your nominee irrespective of the fact that you have already received a major portion of the survival benefit.
Some money back plans also have additional benefits like Critical Illness Rider or Accidental Death and Disability Rider available. The premium paid towards any money back plan qualifies for a tax deduction under section 80C of the Income Tax Act, 1961.
Why Choose a Money-back Plan?
The most important reason to opt for a money-back plan is to meet the liquidity needs during the policy tenure. For example, if you plan your child’s education needs with a money-back plan, then the interim payment through money back plans could help pay for fees or other educational expenses like admission costs, etc. during the policy tenure.
So, here is a quick list of the 4 very popular money back plans in India, in no particular order, in detail to help you choose the best Money-back Plan in India.
Best Money Back Plans that You can Buy
LIC’s New Money Back Plan - 20 years
The LIC Money Back Plan-20 years is a traditional plan offered by LIC. It is a non linked participating plan that gives you a dual benefit, the death benefit and the survival benefit in case the customer survives the term of the policy, plus a money-back at regular intervals. This helps to keep the family of the life assured protected against the financial loss in case the life assured faces an untimely demise. It also helps you to build up a corpus and also get a regular income.
Key Features of the Policy
- Terms of the Policy -
| Entry Age | 13 years - 50 years (as per nearest birthday) |
| Maturity Age | 70 years (as per nearest birthday) is the maximum maturity |
| Sum Assured | INR 1,00,000 (minimum) |
| Policy Term | 20 years |
| Premium Paying Term | 15 years |
- Survival Benefit – A Sum Assured or Guaranteed Benefit is fixed at the inception of the policy. You would receive 20% the Sum Assured on the completion of the 5th, 10th, 15th policy anniversary. The rest 40% Sum Assured plus the vested bonus and the terminal bonus if any declared are given back to you together at the time of the completion of the term on the 20th year.
- Participation of the Policy – The policy is a participating policy. By this, it means that the policy would be entitled to get a bonus every year depending on the profit made by the company. This is paid at the end of the term.
- Death Benefit - Death Benefit is the key factor that needs to be taken into account when you buy a policy. The death benefit in this policy is that your nominee would receive the Sum Assured plus all the vested bonus in case of your demise within the policy term, irrespective of the number of money backs you have already received.
- Tax Benefit – The amount that you invest is eligible to get a rebate Under Section 80© and the entire maturity amount gets a rebate Under Sec 10(10D) under the Income Tax Act.
- Riders – Riders are the optional benefit. You can avail a Critical Illness Benefit and/or an Accidental Death and Disability Benefit at the minor cost of an extra premium.
SBI Life Smart Money Back Gold
This is a traditional Plan and thus is non-linked. It is a participating plan that offers you a guaranteed bonus depending on the performance of the insurance company. It gives you money back at intervals and also a maturity benefit, and In case of demise of the insured person, the nominee receives a death benefit too. This money-back plan comes with the flexibility that you can choose from. Thus it can enable you to meet both your financial goals within the term of the policy and also provide protection to your nominee against any financial loss they face due to your untimely demise.
Key Features of the Policy
- Terms of the Policy -
| Entry Age | 14 - 45 (for regular Premium), 55 (single and limited premium) |
| Maturity Age | 70 years is the maximum maturity |
| Sum Assured | INR 2,00,000 (minimum), max no limit |
| Policy Term | 15/ 20 / 25 years |
| Premium Paying Term | |
| Single-Premium | One time payment |
| Regular Premium | 15 / 20 / 25 years |
| Limited Premium | 8-year payment for a 15-year term |
| 10-year payment for a 20-year term | |
| 12-year payment for a 25-year term | |
| Premium Frequency | Single / Annual / Half-yearly / Quarterly / Monthly |
- Survival Benefit –
| Term | Money-back Payout Instalments |
| 15 years | 3rd, 6th, 9th, 12th year- 15% of Sum Assured per year, |
15th year - 50% of Sum Assured + All Accrued Bonus + Terminal Bonus (if any) Total Bonus – 110% | |
| 20 years | 4th, 8th, 12th, 16th year- 15% of Sum Assured per year, |
20th year - 50% of Sum Assured + All Accrued Bonus + Terminal Bonus (if any) Total Bonus – 110% | |
| 25 years | 5th, 10th, 15th, 20th year- 15% of Sum Assured per year, |
25th year - 50% of Sum Assured + All Accrued Bonus + Terminal Bonus (if any) Total Bonus – 110% |
- Participation of the Policy – The policy is a participating policy. By this, it means that the policy would be entitled to get a bonus every year depending on the profit made by the company. This is paid at the end of the term.
- Death Benefit – The policy provides coverage for the entire tenure of the policy. The death benefit in this policy is that your nominee would receive the Sum Assured plus all the vested bonus in case of your demise within the policy term, irrespective of the number of money backs you have already received.
- Tax Benefit – The amount that you invest is eligible to get a rebate Under Section 80© and the entire maturity amount gets a rebate Under Sec 10(10D) under the Income Tax Act.
- Riders – Riders are the optional benefit. You can avail a Critical Illness Benefit and/or an Accidental Death and Disability Benefit at the minor cost of an extra premium.
HFDC Life Super Income Plan
This money-back plan has been awarded the Best Product Innovation at the Indian Insurance Award 2014. It is a non-linked participating plan money back plan and provides you with a guaranteed return for a period of time to take care of your regular financial requirements. This plan allows you to obtain a guaranteed return for 8-15 years, all of which is tax-free.
Key Features of the Policy
- Terms of the Policy
| Entry Age (minimum) | 1. 30 days (for policy term more than 18 years), 2. It can be any age but the term would be decided in a way that the minimum maturity age is at least 18 years. (when the term is less than 18 years) |
| Entry Age (maximum) | Max Entry Age For Policy Term of 59 15- 16 years 57 18 years 55 20 years 53 22 years 51 24 years 48 27 years 34 15 - 27 years for Single Pay |
| Maturity Age | 18 years – minimum maturity age 70 years - maximum maturity age |
| Sum Assured | INR 1,00,000 (minimum), |
| Policy Term | 16 – 20 years (for regular premium option) 15 - 27 years (for single premium option) |
| Premium Paying Term | It varies with the term and the Payout Option |
| Single-Premium | One time payment |
- Survival Benefit – You can choose from 9 options that the money-back policy provides as the survival benefit. It is a percentage of your Sum Assured that is paid. The payout starts after the premium paying term is over. In the single premium option, the payout is from the second year till the end of the policy term.
- Participation of the Policy – The policy is a participating policy. By this, it means that the policy would be entitled to get a bonus every year depending on the profit made by the company. This is paid at the end of the term
- Death Benefit - The death benefit in this policy is that your nominee would receive the Sum Assured plus all the vested bonus in case of your demise within the policy term, irrespective of the number of money backs you have already received. Thus you stay covered for the entire period of the plan.
- Tax Benefit – The amount that you invest is eligible to get a rebate Under Section 80© and the entire maturity amount gets a rebate Under Sec 10(10D) under the Income Tax Act.
ICICI Pru Cash Advantage Plan
ICICI Pru Cash Advantage Plan is a plan that allows you to choose a flexible premium paying term. It is a non-linked participating plan. The Sum Assured that would be guaranteed depends on the number of years you are paying in the plan. You start receiving a guaranteed bonus the moment your policy paying term ends. You can opt for a monthly guaranteed bonus or a yearly bonus. And over and above it all you would receive a lump sum amount at maturity. Thus this plan helps you to look into the regular expenses and also provides you with a lump sum amount to help you achieve your long term goals.
Key Features of the Policy
- Terms of the Policy – The terms and conditions of the policy are different for the different payout options. The details are as follows:
| 10 pay option | 7 pay option | 5 pay option | |
|---|---|---|---|
| Entry Age | any age (min) | 1 year (min) | 3 year (min) |
| 60 year (max) | 60 year (max) | 60 year (max) | |
| Age of Maturity | 18 years (min) | 18 years (min) | 18 years (min) |
| 80 years (max) | 80 years (max) | 80 years (max) | |
| Annual Premium | INR 12,000 (min) | INR 18,000 (min) | INR 30,000 (min) |
| any amount (max) | any amount (max) | any amount (max) | |
| Premium Paying Term | 10 years | 7 years | 5 year |
| Payout Start Year | 11th year | 8th year | 6th year |
| Term of Payout | Guaranteed Benefit for 10 years | Guaranteed Benefit for 10 years | Guaranteed Benefit for 10 years |
| Total Policy Term | 20 years | 17 years | 15 years |
- Survival Benefit – A guaranteed cash benefit is given to you post the successful completion of the premium paying term for the rest of the period of the policy. The amount is 1% if you opt for a monthly payout and 11.5% if the yearly payout is opted by you. Plus a lump sum amount is paid at maturity which is a total of the bonuses declared by the company or 101% of the premiums paid (whichever is higher)
- Participation of the Policy – The policy is a participating policy. By this, it means that the policy would be entitled to get a bonus every year depending on the profit made by the company. This is paid at the end of the term
- Death Benefit – In case of the unfortunate demise of the insured person the death benefit would be Sum Assured plus Bonuses / Guaranteed Maturity Benefits plus Bonuses / 105% of the sum of all Premiums paid (whichever is higher)
- Tax Benefit – The amount that you invest is eligible to get a rebate Under Section 80© and the entire maturity amount gets a rebate Under Sec 10(10D) under the Income Tax Act.
These are some of the very popular money back plans available in India now. Although the working of most of these plans is very similar, you need to choose according to the schedule of payment that you need in order to plan for your financial future.
