Amongst the most popular insurance policies subscribed to, is the money back policy offered by Life Insurance Corporation of India (LIC). In this article, we look at the salient features of this policy.

What is a money back policy?
Broadly money back policies are fixed term plans in which the premium on the policy is to be paid till the end of the term or the death of the policy holder, whichever is earlier.

However, in case of certain money back plans, the premium paying term is lower than the policy term. The normal money back policy is a term policy of 20 or 25 years where the money is paid back periodically. In the case of a child money back policy, the risk coverage starts from the age of 7 years or 2 years from the commencement of policy whichever is later.

Salient features

• Money back policies have an advantage over other plans, as a part of the sum assured under the policy is made available at regular intervals.
   
• In case of death of the policy holder, the full sum assured along with the bonus thereon is paid to the nominee.
   
• In case of a child money back policy, there is an option of premium waiver benefit and family benefit. For example, if the guardian of the policyholder expires before the child reaches the age of 18 years, future premiums are waived off.
   
• In case of a child money back policy, the regular returns of money can be used to fulfill needs like education whereas the bonus can be used for a start-off in life.

Drawbacks

• To avail of the premium waiver benefit and family benefit, medical examination of the proposer is compulsory.
   
• In case of a child money back policy, in order to avoid the payment of premium on the premature death of the proposer, a nominal premium called as a 'term rider' is added to the yearly premium of the proposer.
   
• A child money back policy can be purchased in multiples of Rs 25,000 only.

Why money back policies?
It is seen that investors prefer money back policies because on unexpected demise of the policy- holder, it gives immediate support to the family members by providing the full sum assured along with accumulated bonus to the nominee. Not only that, the money received at regular intervals can be used for short-term financial needs like household durables or children's education.

For those who want to have a substantial savings along with the security, the periodical returns can be reinvested to have a substantial lump sum amount at the end of the term.

The extended risk cover in some money back policy gives a financial security to the nominee of the policy-holder as even after the payment of the survival benefit, the life risk cover continues for the full sum assured.

Get more info on:

• Jeevan Sneha
• Jeevan Surabhi

Add Comments