Money Back Plans

Money back or Cash back policies belong to the category of endowment assurance Plans [conventional insurance products] that provide benefits as combinations of term assurance and pure-endowment. In a usual endowment assurance Plan the benefits are payable either on death (if death takes place during the term) or on maturity of the policy.

In Money Bach Plans part of the sum assured is returned to the policyholder when he survives a certain portion of the term. For example in a 12-year money Back policy 20% of the sum assured is returned to the policyholder when he survives 4 years and another 20% of sum assured is returned when he survives another 4 years (i.e.8 years from commencement). This is known as Survival Benefit (SB). The balance 60% of the sum assured is returned on maturity of the policy at the end of the 12-year term along with accrued bonus on full sum assured. In money back policy with 15-year term the SB is paid when the policyholder survives 5 and 10 years and the rate of SB is 25% of the sum assured. Balance 50% of sum assured is paid on maturity along with accrued bonus on full sum assured. In a 20-year money back policy the SB is on the policyholder surviving 5, 10 and 15 years   and the rate of SB is 20% of sum assured. In 25-year money back policy the rate of SB is 15% of sum assured and the payments are made when the policyholder survives 5, 10, 15 and 20 years. I have taken here the example of money-back plans of the Life Insurance Corporation of India. The three distinct features of this type of Plans are:

(1) Since SB is expressed as a percentage of the sum assured the benefit may be perceived to be small, but actually it is refunding a major portion of the premiums paid before SB

(2) If death takes place after receipt of one or more SB, the SB paid is ignored and claim is settled for full sum assured, and

(3) Bonus (share of profit/surplus of the insurer) is paid on the full sum assured, since for the purpose of calculating the bonus SB paid is ignored.

In money-back policies the paid-up value is calculated and printed in the policy bond itself.

Different insurers may have different conditions and privileges on such Plans. To know about a specific policy of an insurer it is always advisable to go through the policy or to contact the insurer.

Key words:

Conventional insurance products

Endowment assurance Plan

Money Back Plans

Survival Benefit

Bonus