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Money Back Policy

Money Back Plan

You need different amounts of money at different stages of life. This is why you need to invest with a financial plan. A money back policy can be your one-stop plan to fulfil multiple cash flow needs with a single investment. As a life insurance plan, money back policies can meet two of the most important financial needs for you: the safety of your family and capital.

A money-back policy is a long-term safe investment plan that keeps your investment safe from inflation and taxes. The life cover in the plan will ensure your family will complete their goals even after your untimely demise.

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What is Money Back Plan?

What is a Money Back Plan?

A money back plan is a traditional insurance policy that offers the full sum assured on maturity in the form of several guaranteed survival benefits over the period of the policy. A money-back policy gives you money back at regular intervals. When you invest in a money-back policy, you will receive money during the policy tenure as a percentage of the sum assured. The payout you receive is called "Survival Benefits."

You will continue to receive regular payments throughout the tenure of the policy. The remaining sum assured is paid on maturity along with vested bonuses if any. In the event of the demise of the insured, the beneficiary receives the sum assured along with a bonus amount. The amount is given even if the insured has received payment during the policy tenure. This is one of the unique features of a money-back plan.

Most traditional life insurance plans do not allow you to withdraw funds before the tenure. You always have the option of taking a loan, but the amount may be limited, and you have to start thinking about the repayment as soon as you avail of the loan.

To be prepared for unexpected events in life, you should have a plan that pays you lump sum amounts during the tenure. A money-back plan is an excellent option that solves your liquidity problem.

How Does a Money Back Policy Work?

A money-back policy offers you survival benefits, investment opportunities, and maturity benefits. Let us see how the money back plan works.

Using a money-back policy, you can plan for your financial goals like your child's education and your retirement.

Suppose you want to buy a child money-back plan. Assume the current age of your child is 10 years old. You buy a money back plan for a sum assured of Rs 20 lakhs in 2021. The tenure of your policy is 25 years, and you pay a premium throughout the policy tenure. As per the policy term, you will receive survival benefits of 20% of the sum assured (Rs 4 lakhs) every five years.

On maturity, you will receive your last 20% along with the bonus, if any. You can use the pay outs as follows:

a) 2026: In the fifth year, you receive Rs. 4 lakhs. You can use these funds for your child's tuition fee.

b) 2031: The next payment of Rs 4 lakhs will be made in the policy's tenth year. Your child will be 20 years old by this time. The money received can be used for the higher education of your child.

c) 2036: When your child turns 25, you will receive the third payment in the 15th policy year. You can use the amount for their marriage expenses.

d) 2041: The fourth payment you can keep for retirement purposes. It will come in the 20th policy year.

e) 2046: You will receive the remaining Rs. 4 lakhs from the policy, plus any applicable bonuses, and the policy will be terminated.

f) If you die during the policy term, your nominees will receive the sum assured of Rs. 20 lakhs plus any accrued bonuses, and the policy will be terminated.

By 2041, you would have received Rs 16 lakhs. In 2046 (maturity), you will receive the remaining Rs 4 lakh along with the bonuses. The policy will terminate once you have received the final payment.

In the case of an unfortunate event, if you die in the 18th year of the policy, the beneficiary will receive Rs 20 lakh (sum assured) along with bonuses. The nominee receives the complete sum assured, even though you have received Rs 12 lakh by then.

Example of a Money Back Policy

Let us understand how a money-back plan works with the example of Sachin.

Sachin has started investing in the Money Back Advantage Plan, a money back policy from Canara HSBC Life Insurance.

Sachin is married and has a 10-year-old son as well. He purchased the policy for a period of 16 years. To continue his money back policy, he has to pay regular premiums for 10 years (premium payment term).

Survival and Maturity Benefits

Through this money-back insurance policy, he will receive 20% of the sum assured as payouts in the 5th, 9th, and 13th years of the policy.

These amounts are known as "survival benefits". If Sachin survives the term of the insurance policy, then the remaining amount will be given in the 16th and final year of the policy. This is also known as the ‘maturity benefit’.

Here are the stages of the policy:

1st payout: This is in the 5th year of the policy. With the money received, Sachin and his family planned a trip to Europe, something they had always wanted.

2nd payout: The second payout is made in the 9th year of the money-back policy, Sachin’s son has now turned 18 and has finished his schooling. He wants to have a career in the field of science and, thus, decides to pursue B.Tech. This payout is used to pay his college fees.

3rd payout: Sachin received the 3rd payment at the end of the 13th year of the policy. He used this payout for his son’s marriage.

4th payout: This is the final payout. This is the maturity benefit and also includes the bonuses the policy has accrued. He thinks now that his son is settled. He decides to use this maturity amount to save for his retirement and purchase a small house for himself and his wife.

What Happens at the Time of Death?

If Sachin dies during the term of the policy, then his family will receive the sum assured along with the accrued bonuses.

Why do you Need a Money Back Policy?

You will need a money-back policy in the following scenarios:

1. You want to Preserve your Savings

This is a very common use of money-back policies, as it allows your savings to stay safe and become useful later. Also, these savings will not only come back to you within a few years, but you will also have a growing retirement corpus available at maturity.

2. You want to Simplify your Investments

Investment decisions can be very challenging, especially when your focus is on earning money rather than investing. But you do not want to lose your savings while you decide. So, invest in a money back policy to preserve the capital from inflation, lock-in, and taxes.

3. Save for an Important Family Goal

Money back policies can not only preserve your invested capital, but also the goal itself. The sum assured will be available to the family when you cannot be there for them.

4. Support a Dependent Family Member

Often parents spend their entire life’s earnings and fortune to help you stand on your feet. Even at times, you may have a family member who needs lifelong financial support due to illness or disability. Money-back policies are perfect long-term cash flow solutions in these scenarios.

Features of a Money Back Policy

The best money back plan helps you achieve both your medium and long-term goals. It also gives you a life cover. Here are some features of the best money-back policy:

Guaranteed Returns

Guaranteed Returns

A money back policy is an ideal investment if you want safe and secure returns. The returns are not driven by the fluctuation of the equity market. You receive guaranteed returns irrespective of how the market is behaving.

Income During the Policy Tenure

Income During the Policy Tenure

You receive regular income to take care of your large expenses. For example, you can use the money to pay off your existing loans, go on vacation, or redesign your house.

Income on Maturity

Income on Maturity

You get a guaranteed and secured income on maturity, which helps you plan your future in a much better way.

Financial Support upon Death of the Insured

Financial Support upon Death of the Insured

If the policyholder passes away, the nominee receives the sum assured along with the bonus (if any). The policy acts as a standard insurance plan in this respect.

Bonus Additions

Bonus Additions

There are two types of bonus amounts in a money-back policy: a reversionary bonus and an additional bonus.

  • The reversionary bonus is given as a percent of the sum assured by the company. The amount gets added to the overall payment you are supposed to receive at maturity or in the event of an unfortunate event.
  • Sometimes, the company may also give you an additional bonus depending on the company's performance. The other instance when you receive additional bonuses is when you pay the entire premium on time.
Add-on Riders

Add-on Riders

The option to add different riders to your money back plan depends on the policy you are choosing. You may also get the option to add a hospitalisation rider to your money back policy that will help you manage the hospital expenses if the policyholder or life insured has been hospitalized.

A premium waiver is another rider that you may include if it is available in your money back plan. If the policyholder fails to make the premium payment, this rider protects the loss of the life insurance plan. The policies continue to protect the lives of those who are insured rather than expiring due to nonpayment of premiums.

Riders Available in a Money Back Policy

A money-back policy provides you with an option to add coverage that is not included in the original policy document in the form of riders. Riders give you cover in cases like accidental death, hospitalisation expenses, terminal illness, permanent disability, and many more.

Hospitalization Rider

This rider aids you by paying your hospital bills when hospitalized. To cover your treatment, you will receive a daily allowance under this rider.

Accelerated Sum Assured

This rider helps you get a sum assured on being diagnosed with any of the specified critical illnesses. The rider is helpful as it gives you the sum assured without even having to pay the premium or wait for the policy term to end to receive the sum assured.

The availability of the rider varies from insurer to insurer and also depends on your policy tenure. In general, you can purchase the below riders along with the best money back policy.

Waiver of Premium

This rider provides you with a waiver from paying the premium amount under certain circumstances. Even though you don't pay a premium, you will be eligible for life insurance.

Accidental Death Rider

In this rider, if the policyholder suffers an accidental death, the beneficiary will receive a lump sum amount.

Terminal Illness Rider

If you contract a terminal illness (as defined by the rider), the rider will provide you with guaranteed cash. So, in a way, it acts as a guaranteed money back plan. You can use the money to pay off your medical bills or for any other reason. Some of the major terminal illnesses covered are:

  • Heart attacks and bypass surgery
  • Paralysis or strokes
  • Different types of cancer
  • Renal or kidney failure

4 Benefits of Money Back Policy

High Liquidity with Survival Benefits

High Liquidity with Survival Benefits

You receive the money every few years over the tenure of the policy.

Family’s Financial Safety with Death Benefits

Family’s Financial Safety with Death Benefits

If the policyholder passes away, the nominee receives the death benefits of the insured person.

Maturity Benefit

Maturity Benefit

Once your policy matures, you receive the sum assured and the bonus amount.

Tax Benefit

Tax Benefit

Some of the money-back policy offers tax benefits.

Advantages of Money Back Plans

Money back policy is one of the best variants of life insurance. A money-back plan gives you guaranteed regular payouts at defined intervals. These payouts start within the policy and help you meet various needs and achieve your investment goals. Here are the advantages of this plan.

Guaranteed Returns on Investment

One of the biggest benefits you can get from your money back plan is that you will get guaranteed returns. Thus, as the name suggests, it makes sure that you get your money back from the policy. This advantage makes the money-back policy a tension-free investment. You will not have to stress as to how your investment will do and whether you will be able to get money or not.

This is an ideal plan if you do not like to take risks and the safety of the corpus is your top-most priority.

Provides you with a Life Cover

Since a money-back plan gives you a payout at regular intervals, and that it comes with an insurance cover as well. So if anything unexpected happens and you lose your life, then your family will be given a lump-sum amount, i.e., the sum assured.

The sum assured that your family will receive will help keep them financially secure so that they do not have to struggle. Through this money, they can carry on with their expenses and can achieve their goals even if you are not there to provide for them.

Returns are Generated After a Few Years

In other variants of life insurance, there is only a death benefit involved. That is, your family will receive the sum assured if you die during the policy. While in other policies, you may have to wait a long time to receive a benefit. But with a money-back insurance policy, you receive the returns while your policy is still running.

You start receiving payouts just a few years after investing in the policy. In the Canara HSBC Life Insurance, Money Back Advantage Plan, for example, the payout begins at the end of the fifth year.

Helps Increase your Sum through Bonuses

Bonuses are an integral part of a money-back plan. You can get an additional amount in terms of bonuses, such as "reversionary bonus" and "terminal bonus". These bonuses are available if you have paid all your premiums.

A simple reversionary bonus is added to your policy at the end of the year. This gets accrued every year. This accrued amount is given to you at the time of maturity or at the time of your death, to your family.

There is another bonus known as a "terminal bonus" in the money-back plan. These are based on the profits earned by the insurance company.

Tax Benefits

As with other life insurance plans, a money-back plan is also eligible for tax deductions. These tax deductions are available under section 80C of the Income Tax Act 1961.

These tax-benefits help you reduce your tax liability. That is, you can lower your annual tax outflow if you invest in a money-back policy and save even more money.

Under Section 80C, you can avail a deduction of up to Rs 1.5 lakh towards the premium you pay for your money back plan. Also, the maturity benefit will be exempt from tax if your annual investments in the plan never exceed 10% of the policy life cover.

How to Choose the Best Money Back Policy?

How will you choose the best money-back policy among all the money-back policies available? Let us see how you can find the best money back policy. Your choice of money back policy will depend on the below factors:

Your Financial Objectives

You will have to look at your medium and long-term goals and, accordingly, choose a plan. Assess your current financial goals and situation. To easily achieve them, choose the term of your money back policy as per your financial goals and milestones.

Your Current Income

Your current income and the percentage of it, that you can pay as a premium. Based on the premium you pay, your sum assured will be calculated. You will have to work out the best combination of the premium amount you can pay, and the amount of assurance you want to receive.

When are you Buying it?

At what stage are you buying the plan, and for how many years do you want to stay invested? Ask yourself these questions when you are buying the best money back plan. It will help you understand your financial goals. Pay attention to the terms of your money back policy and assess the need for cover accordingly.

Payout Structure

What kind of pay out structure do you want? Most of the money-back plans pay every five years. If this is not in line with your goals, you can look for a plan offering pay out as per your requirements.

Child Money Back Plans

Child money back plans are money back plans more suited to fulfilling a child’s higher education and marriage goals. A child will need a regular cash infusion every few years during their higher education years. A money back policy with its regular cash flow can support this financial need of the child without your intervention. At the same time, you can guarantee the financial support even if anything happens to you on the way.

Comparison between FD and Money Back Plan

Fixed Deposits and Money Back Plans are two of the most popular investments that involve lower risk and guaranteed returns. But these plans have several differences as well. Let's take a look at the differences between these two investments.

Type of Investment It is a fixed investment/savings scheme wherein you put lump-sum money and earn returns This is a type of life insurance plan that provides life coverage and regular payout
Returns Fixed-rate Guaranteed Returns
Term Flexibility in choosing the term. FD’s range from 7 days to as long as 10 years Generally taken for a long-term period can range from 10-30 years
Investment Required The investment is generally low and depends on where you are opening your account.
Minimum investment ranges from Rs 1000-5000. There is no maximum limit
The premiums are to be paid regularly and the amount depends on various factors such as age, sum assured, riders, etc.
Visit the online premium calculator to get an estimate
Mode of Payout FD gives you a pay-out in a lump sum after maturity You will get payouts at regular intervals defined by the policy. Maturity benefit at the end can be in lumpsum.
Withdrawal You can withdraw your amount but it will cause a reduction in the interest rates Withdrawals can be allowed in a money-back plan depending on the type of policy
Tax-Benefits Not eligible for tax benefits Eligible for tax benefits u/s 80C and 10(10)D of the Income Tax Act

Eligibility Criteria to Buy a Money Back Plan

To buy a money-back policy, you need to satisfy any (2) of the below-mentioned eligibility criteria:

  • The minimum age at the time of buying the policy should be 8 years or above.
  • The maximum age to start a new policy is 55 years. If you are paying premiums in monthly mode, the maximum entry age would be 45 years.
  • The maximum age for the policy to mature is 71 years.
  • You should be financially sound to pay the premiums for the policy.

Documents Required to Buy Money Back Plan

If you are planning to buy a money-back plan, you will have to provide the following documents to the insurance company:

  • Documentation proving your age
  • Your address proof document
  • Proof of your income
  • Application form duly completed
  • Medical reports, if required

Factors you Need to Consider Before Buying a Money Back Policy

The following are some of the things that you should take into account before you go ahead and purchase the best money-back policy for yourself.

1. Financial Goals

You invest your money in policies so that you can meet your family’s financial goals in the future. Each policy works in a set way and has different features. Ascertain the goal for which you are purchasing the policy. The best money back policy is the one that aligns with your needs.

2. Premium of the Plan

The first and foremost thing to consider before purchasing a money-back policy online is the amount of premium you need to pay. The premium is based on factors such as age, gender, term, etc. You must choose a plan that fits your budget. Selecting a policy with a high premium that you cannot afford can cause difficulties in the future.

3. Sum Assured

This is the amount that your family will receive after your death. Before choosing the sum assured, you need to assess your current financial situation along with your family’s future needs. The sum assured you choose for your money back insurance plan should be enough that your family does not make any compromises.

4. Returns and Payouts

Check thoroughly how the policy works and in what way the payouts will be given to you. A money-back policy gives you a regular payout. You should consider the duration after which the payout will start and at what frequency. Check that the strategy aligns with your goals.

5. Additional Benefits

A policy offers many other benefits as well. Purchase a policy that provides you with all-around performance as well as other benefits. These can be in the form of riders, additional bonuses, etc

Why Buy Money Back Plan from Canara HSBC Life Insurance?

Canara HSBC Life Insurance is offering you a wide range of life insurance plans. You should buy money back policy from Canara HSBC Life Insurance for the following reasons:

A huge network of branches


A huge network of branches

The company has 10000+ Bank branches, Backed by Canara Bank and HSBC Bank

Huge AUM

Rs.25000 Cr

Huge AUM

The company has Rs.25000 Cr crores in Assets Under Management (AUM) as of March 2022.

High Claim Settlement Ratio


High Claim Settlement Ratio

The insurance plan is useful if the claims are not only settled after the demise of the policyholder but are settled fast. We have a claim settlement ratio of 98.57% in FY 2021-2022 for individual death claims.

Are money-back policies a good investment for you?

If you want the safety of capital, money-back policies are a perfect investment option for you. Money-back policies are safe, long-term investment plans that invest money in government bonds and top-rated corporate debt.

Due to the regular cashback feature, money-back policies are also more liquid than other long-term insurance policies. You can use the money back plans to create a secure stream of tax-free income for your family. Thus, money-back policies are a perfect wealth transfer instrument as well.

For example, you can start five money back advantage plans over the next five years and invest in such a way that the money-back arrives every year from a different policy.

FAQs on Money Back Policy

Is the amount received from money back policy taxable?

The amount you receive from your policy is taxable only if the invested premium in a policy year is more than 10% of the base life cover sum assured of the policy.

Can I transfer my money back policy?

No, you are not allowed to transfer your money back policy. However, there is an option to make an assignment in another person's name. Or you can buy a new money back policy for the other person.

Is money back policy risky?

All investment instruments have a certain amount of risk. Money back policy is less risky compared to other investment products.

What are the tax benefits of a money-back policy?

The amount you pay as a premium helps you reduce your tax liability under section 80C. Thus, you can claim a deduction for up to Rs. 1.5 lakhs of invested premium every financial year. The money backs and maturity value received from the policy is also tax-free if the annual premium of the policy had been less than 10% of the life cover amount.

How can I surrender the money-back policy?

If you want to surrender your money back policy, you will have to visit the branch office of the insurance company. Or you cannot do it online.

How frequently am I required to pay the premium for a money back policy?

Paying premiums regularly is essential to keep any life insurance policy running. The frequency with which you will pay your premiums depends on the insurance company you are buying them from.

For example, in Canara HSBC Life Insurance, Money Back Advantage Plan, the premium payment term is 10 years and you can choose to pay monthly or annually.

What is the best money back policy?

The money-back policy that suits your budget and risk preference and aligns perfectly with yours as well as your family’s needs and goals is the best money back policy. Take into consideration all your current and future needs before purchasing the best plan.

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