Guaranteed Money Back Insurance Plans

February 11, 2011   ·   2 Comments

Lesson 5: Money Back or

Money back insurance plans serve as both, insurance cover and savings. In a money-back plan, you keep getting a percentage of the sum assured during the lifetime of the policy. In case of the insurer outliving the term, he/she gets the remaining corpus with accrued options like bonus. In the event of his/her death before the full term of the policy, his/her nominee or legal heirs get the sum assured irrespective of the number of installments received, with accrued benefits.

What are riders?

Riders are additional benefits which you can add to your insurance policy at a nominal cost. These riders give you the benefit of increasing your risk cover upto twice the amount of the sum assured thus benefiting the beneficiary. For instance if you have taken an Accident Death Benefit rider and you die due to an accident then your beneficiaries can get upto a maximum of twice the basic sum assured. Similarly there are different riders addressing different contingencies like Critical Illness, Permanent Disability Benefit, etc. There are riders available that waive your future premiums in case of death or disability of the purpose. These can only be taken at the beginning of the policy term.

What are the different types of riders one can opt for?

Riders are the additional benefits added by paying a marginal additional premium. Riders may include Accident & Disability Benefit Rider (ADBR), Accident Benefit Rider (ABR), Critical Illness Benefit Rider (CIBR), Waiver of Premium Rider (WOPR), Income Benefit Rider (IBR), etc. Tax benefits can be enjoyed on riders.

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What are the Benefits of Money Back Policy?

On Death:

Full sum assured is payable at death of the life assured within the term, without any deduction of earlier survival benefits. (e.g. for example, suppose a person takes a Rs.1,00,000/- policy for 20 years. At the end of the 5th and 10th year he receives Rs.20,000/- each as survival benefit. If he happens to die in the 12h year, the nominee of the life assured will receive full Rs.1,00,000/-, irrespective of the earlier benefits of Rs.40,000/-)

On Survival:

Term At the end of Amount of money back For Example, on a Rs. 1,00,000 policy
20 years 5thyear 20% of sum assured Rs.20,000/-
10thyear 20% of sum assured Rs.20,000/-
15thyear 20% of sum assured Rs.20,000/-
20thyear 40% of sum assured Rs.40,000/-
25 years 5thyear 15% of sum assured Rs.15,000/-
10thyear 15% of sum assured Rs.15,000/-
15thyear 15% of sum assured Rs.15,000/-
20thyear 15% of sum assured Rs.15,000/-
25thyear 40% of sum assured Rs.40,000/-


What kind of Premium I need to Pay to Get a Money Back Policy?

Premium in the Money Back Policy are the Highest in terms of Comparison of all the Insurances. Let us take an Example

For a 25 Year Old, for a Money Back Policy for a Cover of 10 Lac,  for a 25 Year Tenure Bajaj Allianz takes a Premium on 88,000 Rs. There are few Plans from LIC such as LIC Surabhi which are no good either.

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Again a Million Dollar Question:

Should I Buy Guaranteed Money Back Policy?

 Well Answer to this Million Dollar Question is a simple One & That’s is NO. Here are the Reason why we feel this is not the Right Policy for you:

1)      The Insurance Covered by the Policy is ridiculously Less. If you are taking an Insurance Policy, then First thing it should Provide is Good Insurance Cover which it fails to do so.

2)      The Returns offered by Money Back Policy Plan is too Less if we compare the Other Investment Plans which have an Investment Horizon of 20 Years. There are Few Companies which have started Coming up with Unit Linked Money Back Plan or Even Guaranteed so that they can Provide Better returns to the Customers. All these Riders & guaranteed Money Back Schemes are nothing but to Loot the People.

There is common Saying: Why go for Copper why you are getting Diamonds? 🙂

There are Products & Combination of Products which will yield you much better returns than these Guaranteed or Money Back Policies. Remember the Einstein 8 Golden rule which we Discussed in the Lesson 1 of Financial Planning. The Return of 20% %  & 8% in a long Run from 20-30 Years will make Difference of you Being a Crorepati or Lakhpati.

We’ll Cover in Coming Posts that what is the Perfect Combination of Insurance & Investments that should be taken for one’s Portfolio for creating a Wealth for you.

I appreciate Comments be it Favour or Criticism. Post your Comments to let me know what you have in your Mind?

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Rajesh Singla

Rajesh is the founder & CEO of Stockssavvy, Stocks analyst,financial advisor by choice,software engineer by fate,biker,gamer,cricket lover n enthusiastic person. He believes in doing things not just to get by but to get Ahead...

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  • Dr.R.K

    I am a dentist of 33 years of age. Right now, i am investing around 1,40,000 a year to a mixture of life insurance, health insurance, mutual funds and pension schemes. i have 2 daughters less than 3 years of age. Kindly guide me on the financial target i might need for their future expenses and the monthly investment needed for the same.

  •  DrGurinder Kanwar  You can send me the details of your investments on my id – Once going through the details, i will be able to guide you better on your investments.

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