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Insure & Invest at the Same Time

The one big advantage of buying a money-back policy is that it offers returns on the premiums that you invest through the span of the policy, thus working as an investment alternative too

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Insure & Invest at the Same Time

The one big advantage of buying a money-back policy is that it offers returns on the premiums that you invest through the span of the policy, thus working as an investment alternative too

Risk management is one of the most important parts of investment as well as human life. Insurance is part of the overall risk management and its planning is one of the essential aspects for every individual in his or her financial plan. Insurance is vital as it ensures that you are financially secure to face any unseen and unfortunate event. In case of the unexpected death of any family member who has dependents i.e. if a sole bread-earner dies, it may leave dependents in emotional despair as well as financial stress. In order to avoid such uncertainties, it is important for an individual to possess life insurance.

Some individuals think that investing premium in insurance isn’t worth it as they wouldn’t receive any benefit if they survive the policy. Taking this psychology into consideration, insurance companies came up with new kind of insurance policies which offer insurance as well as investment. Thus, you get dual benefits. On the same lines, insurance companies offer a policy called a money-back policy. The following graph depicts the actual number of registered deaths versus the number of estimated deaths from the 2007 to 2018.

As can be seen, registered deaths are increasing year on year, which makes insurance a very essential tool in order to safeguard against financial crisis. A money-back policy helps an individual to fulfil the dual requirement of insurance to secure against any adverse financial conditions and also make an investment in order to cater to future requirements. Money-back policies are fixed-term policies. The premium is paid till the end of the term or till the death of the policy-holder, whichever arises earlier. A part of the sum assured is returned back to the policy-holder once in four or five years according to the plan.

This policy is ideal for investors who want guaranteed returns on their investment and regular payouts as well as insurance. The money is paid back during the plan of the tenure and is a percentage of the sum assured, known as survival benefit. Nonetheless, if the insured dies during the maturity period of the policy, his dependents will get the full sum assured irrespective of the survival benefits already paid. With its low-risk feature, money-back policies are perfect for risk-averse individuals who are seeking investment as well as insurance coverage with income and maturity benefits.

Policy Features
Income during Term of the Policy: This is one of the salient features, which is why people prefer this policy. Uncertainties can occur during the policy term wherein an insured may face financial stress. This policy offers payouts on regular intervals based on the plan and provides the policy-holder a stream of income out of which he can pay off debts, plan for his children’s education, and can fulfil any other life goals. It is ideal for individuals who are looking for safe and secure investment with consistent returns along with insurance.

Dual Components in Single Policy:

This policy offers dual component viz. insurance and investment i.e. you are covered against any financial crisis as well as you get regular benefits. This policy is the only policy which offers four-fold benefits, namely, survival benefit on regular intervals, maturity benefit, death benefit and bonus on the maturity of the policy.

Add-On Riders Available: Like any other insurance plan, this policy also offers insurance against critical illness and accidental death benefits, etc.

Tax Savings: All life insurance premiums qualify for tax deduction under Section 80 C of the Income Tax Act, 1961. Premiums will be deducted if the premium is less than 10 per cent of the sum assured. Therefore, if any individual invests in any life insurance plan he can claim tax deduction.

Bonus Enhances Maturity Amount: The policy-holder can receive bonus amounts at the time of maturity, which enhances the maturity amount. The money-back policy also participates in the insurer’s profit through bonus. The bonus is the percentage of the sum assured and percentage of the bonus is decided by the insurer. 

Operational Strategy
Let’s consider an example to see how the money-back policy works: Ramesh Ojha purchases a money-back policy and selects tenure of 20 years for sum assured of Rs20 lakhs. He pays all the premiums regularly throughout the tenure. As such, the survival benefit and maturity benefit will be as follows:

Here, Ramesh will receive Rs4 lakhs (20 per cent of Rs20,00,000) as survival benefit in the fifth, tenth and fifteenth year. And at maturity he will receive Rs8,00,000 (40 per cent of Rs20,00,000) or Rs20,00,000 – 4,00,000 along with bonus. If unfortunately Ramesh dies in the sixteenth year, then his dependents would receive total sum assured of Rs20,00,000 irrespective of survival benefit of Rs12,00,000 he has already received.


Before investing in any insurance plan, one should assess factors such as financial goals, how much funds you are ready to invest to purchase any insurance policy, time horizon and risk appetite and then decide to purchase the plan. Every plan offers some good features but one should go through an individual policy document in order to get an idea about is pros and cons. One who is planning to buy an insurance plan should be first clear about which plan he or she wants to invest in such as pure insurance or insurance with investment component. Our assessment of various insurance products has revealed that mixing insurance with investment is not a right decision as you will neither get the benefit of adequate insurance coverage nor do you get inflation-beating returns. Nonetheless, as explained earlier, for many persons who simply avoid pure term insurance just because they are not receiving anything in return, they can opt for money-back policies.

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