Spend, Save and Invest Smartly

Money Back Life Insurance Policy

You work very hard but one commodity is always in shortage. No guesses on this one. It has to be money. You need money at all stages in your life. When you are just married. When you are blessed with your first child. When you start a business venture. But money is most important when your son or daughter wants to do an MBA or a highly costly professional course or it is time for them to get married.

What is a money back life insurance policy?

A money back life insurance policy is basically a type of an endowment life insurance policy. In an endowment life insurance policy you get the maturity benefits (sum assured + bonus) only at the end of the tenure (time period) of the life insurance policy.
The money back life insurance policy pays you money at certain fixed time intervals across the tenure of the policy.

How the money back life insurance policy pays you if you survive the term of the policy

20 year money back life insurance policy

20% of sum assured after 5th year + 20% of sum assured after 10th year + 20% of sum assured after 15th year
The balance 40% of sum assured + all accrued bonuses after the 20th year.
The accrued bonuses are Simple Revisionary Bonus and the Terminal bonus. Bonuses are calculated on the full sum assured.

25 year money back life insurance policy

15% of sum assured after 5th year + 15% of sum assured after 10th year +15% of sum assured after 15th year + 15% of sum assured after 20th year The balance 40% of sum assured + all accrued bonuses after the 25th year.

What happens if you die within the term of the money back life insurance policy?

If you (policyholder) die at any time within the tenure of the money back life insurance policy your family (nominees) get the death benefits. Your family gets the death benefit (The full sum assured) along with the vested bonus (Simple Revisionary Bonus) or a terminal bonus if applicable as a lump sum. The survival benefits which have already been paid to you are not deducted from the sum assured. Your nominees (family) get the full sum assured irrespective of earlier survival benefits received.
Remember: Vested bonus is paid only out of the profits of the Insurer .If there are no profits then the money back life insurance policy will not pay you a vested bonus.

What is a paid up money back life insurance policy?

If you avail a regular premium paid up money back life insurance policy and you are not happy with this policy, you can convert it to a paid up policy if you discontinue paying the premium after 2 years. Your money back life insurance policy continues to remain in force (remains valid) but with a lower sum assured. You have availed a money back life insurance policy with a premium paying term of 10 years (You have to pay the premium for 10 years).The policy matures in 20 years. You have to pay an annual premium of INR 40,000.

The sum assured is INR 10 Lakhs. (This is the death benefit your nominees get if you die within the term of the policy). You have stopped paying the premiums on the money back life insurance policy after 5 years instead of 10 years. (You have paid only 5 premiums).
Paid Up Value = INR 5,00,000
If you had paid all the premiums on your money back life insurance policy (10 year premium paying term) you would have got a sum assured of INR 10 Lakhs and the accrued bonus.
Sum assured + Bonus

If you do not pay your premiums the money back life insurance policy continues to remain in force (becomes a paid up policy) but with a lower sum assured.
You get only a sum assured of 5 Lakhs at the end of the term of the money back life insurance policy.

Tax benefits of a money back life insurance policy

You get a deduction under Section 80C of the income tax act up to INR 1.5 Lakhs per year on your taxable salary for the premiums you pay for the money back life insurance policy. The maturity amount you get when the policy matures or the death benefit your family gets on you (policy holders) death are tax free under Section 10(10d) of the income tax act.
Life is all about surprises, and when you get money when you need it the most, it is very pleasant.

"A big part of financial freedom is having your heart and mind free from worry about the what-ifs of life".
A money back life insurance policy makes sure you get the money to free you from the what if’s of life.

Insurance
Term Insurance