How Does a Money Back Policy Work?
A money-back policy offers you Survival Benefits, investment opportunities, and maturity benefits. Let us see how money back plan works.
Using a money-back policy, you can plan 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. You buy 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: You receive Rs 4 lakhs in the 5th year. You can use these funds for the tuition fee of your child.
- b) 2031: The next payment of Rs 4 lakhs will come in the 10th year of the policy. 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: You will receive the third payment in the 15th policy year when your child will be 25 years. You can use the amount for his/her marriage expenses.
- d) 2041: The fourth payment you can keep for your retirement. It will come in the 20th policy year.
- e) 2046: You will receive the remaining Rs. 4 lakhs plus applicable bonuses from the policy, and the policy will terminate.
- f) In the case of your death within Policy Term, your nominees will receive the Sum Assured Rs 20 Lakhs plus accrued bonuses to date, and the policy will terminate.
By 2041, you would have received 16 lakhs. In 2046 (maturity), you will receive the remaining Rs 4 lakh along with the bonuses, and the policy will terminate once you have received the final payment.
In 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.