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Are Money Back Policies Really Productive?

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December 18, 2018

Financial security and growth of funds is what we all desire and we work towards the fulfillment of our goals. In the process, all of us try to save as much as we can so that by the end of a particular term, we have a sufficing corpus to cover our needs. However, merely by putting aside an amount from our regular income, we cannot expect to have huge returns and therefore, we must seek decent investment options so that significant returns can be yielded. At the same time, for the long term security of our funds and for a safe financial future of our loved ones, we must ensure that there is a relevant insurance scheme in place.

These days, owing to the growing customer centric policies and the focus on customer's satisfaction, many innovative schemes and features are available in the market. There are such schemes those that are generally referred to as money-back policies. These policies are basically traditional insurance plans that offer coverage benefits like any other traditional insurance plans. However, this is where money back policies are different. A money back policy offers the unique feature of regular payouts in a pre-decided frequency over the entire term of the plan. In case of the policy subscriber's demise during the term of the plan, her/his nominee(s) are entitled to the main coverage benefit (i.e. the sum assured), independent of the amount that has been already paid by the insurer as regular payouts. In simple words, money back policies provide the additional benefit of regular amount over a set period of time during the term of the plan, and also the complete payout of the main sum assured to the policy holder's nominee(s) in the event of the subscriber's demise during the term.

At this point, money back policies may seem to be comprehensively beneficial because the policy holder is entitled to additional pay outs and the sum assured remains as the payable main fund. However, the overall economic viability of money back policies must be carefully studied and analyzed before investing in one. The whole argument is that the money back policies are supposed to not only provide coverage benefits but also supposed to act as investment instruments for the overall financial growth of the policy holder. Therefore, it can be stated that money back policies are ideally meant to generate returns on investment (in this case the payable premiums) that make the funds grow. However, when viewed in detail, this is not entirely so. Once you compare the whole volume of premiums paid by the subscriber over the term of the plan, you may find that the premium rates are in fact, much expensive. This, in essence, means that the generated returns of the money back policies in comparison to the paid premiums tend to be less cost efficient. After all, when the comparison between the premium rates of money back policies and those of traditional term insurance plans is made, the term plans emerge as much economical. Therefore, a thorough analysis of your specific requirements must be done before investing in money back policies.

HDFC Life presents HDFC Life Super Income plan a non-linked money back plan that allows you to fulfill your financial dreams at all times and comes with guaranteed benefits. For details, click on the mentioned link: https://www.hdfclife.com/savings-plans/super-income-plan.

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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