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- Money Back Policy
- What is a Money Back Policy
- How Does A Money Back Plan Work?
- Why Do You Need
- Key Features
- Benefits
- Policies Offered by HDFC Life
- Understanding with an Example
- Eligibility Criteria
- Documents Required
- Child Money Back Plan
- Riders available
- Choosing the Best
- Benefits of Buying
- Factors to Consider while buying
- Why Buy a Money Back Plan
- Comparison between FD & Money Back Policy
- Is it a Good Investment
- FAQs
- Here's all you should know
- Popular Searches
- Disclaimer
- Things to Consider Before Buying a Money Back Plan
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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.
Written By:
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.
Reviewed By:
What is a Money Back Policy?
A Money Back Policy is a life insurance plan that offers dual benefits: financial protection and investment returns. It provides regular payouts to the policyholder at set intervals during the policy term, ensuring a steady income stream. In case of the policyholder's death or an accident, the policy ensures financial security for the loved ones. Additionally, if no claims are made, the policyholder still benefits from the regular payouts, making it a secure and rewarding option.
How Does A Money Back Plan Work?
As its name suggests, a money back plan is a form of life insurance that allows the policyholder to receive a portion of the total sum assured at regular intervals, such as monthly or yearly, instead of a lump sum at the end of the policy’s period. This way, money back policy works differently from a standard insurance plan, wherein a lumpsum payout is given to the nominee in case of the policyholder's demise.
The payout amount received in the money back policy is referred to as 'survival benefit'.
An example to help you understand better
Let’s take an example to help you understand how a money back plan works. Here is an imaginative scenario. Mrs. Ganeshan buys a 20-year money back policy with an assured sum amounting to Rs. 50 lakh. The money back plan offers Mrs. Ganeshan 20% survival benefits in every 5 years of the policy, starting from the purchase date of the policy.
Now, Mrs Ganeshan will thus receive Rs. 10 lakhs in the fifth, tenth, fifteenth and twentieth year of the money back policy. Additionally, in the last year of policy, i.e., the 20th year, she would also get the remaining Rs. 10 lakh, coupled with any bonuses, if there were any.
However, if Mrs. Ganeshan unfortunately passes away in the 15th year of the money back policy, then her nominee would receive the entire assured sum as death benefit despite Mrs. Ganeshan had already availed Rs. 40 lakhs as survival benefits.
What about risk factors?
It is noteworthy that unlike traditional market investments such as stocks or bonds that are risky and volatile, the money back policy does not possess such a high degree of risk aspect towards your investment. Money back plans ensure a guaranteed and steady income inflow throughout the policy tenure, thus offering a safe and secure investment option for you.
Why Do You Need a Money Back Policy?
A money back policy is one of the best long-term investment plans available in the market. Here are some of the reasons stating its significance:
- It is a combination of insurance and investment which means it enables the policyholder to earn some income at regular intervals along with a death cover in the event of the policyholder’s unfortunate death.
- It enables the policyholders to receive guaranteed returns on their investments and at the same time multiply wealth through various investment plans.
- Moreover, the assured annual pay-outs and the life insurance coverage help in making excellent choices in income and security.
- Policyholders can invest in various types of money back plans depending on their life stage when he or she is making an investment. For example, if you avail a child insurance plan, it can help to cover your child’s education.
What are the Key Features of Money Back Policy?
Money back policy has several features that prove to be beneficial for your financial goals:
Guaranteed Returns
Low-risk, non-linked money-back policies offer guaranteed returns at regular intervals.
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Life Coverage
These policies help you secure your family’s future with the sum assured. Your loved ones receive the payout if anything happens to you.
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Bonus and Additions
Many policies offer bonuses, enhancing the policy’s value over time.
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Flexibility
You can choose a policy that aligns with your financial goals.
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Regular Pay-outs
A money back policy allows a policyholder to earn period pay-outs at regular intervals throughout the policy tenure.
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Survival Benefit
Survival benefits are basically periodic payouts which a policyholder receives at the end of the tenure.
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Maturity Benefit
Apart from survival benefits, these policies provide a lump sum payout as a maturity benefit.
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Death Benefit
It also provides a death benefit to the beneficiaries or nominees of the policyholder in the event of an unfortunate demise of the policyholder.
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Guaranteed Surrender Value
Also the policy allows a guaranteed surrender value in case a policyholder decides to discontinue the policy within the given tenure.
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Income during the Policy Term
It ensures the policyholder gets to earn guaranteed returns at a regular interval throughout the policy tenure which acts as a second source of income. Saving schemes like money back plans give you the opportunity to grow your wealth in the long term in a steady manner.
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Add-on Riders
You can also add riders over and above the base policy such as accidental death cover, critical illness cover, etc
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Tax savings
Tax benefits on life insurance applicable under deductions under 80C and section 10(10D) you can save tax on premiums paid and maturity amount.
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What are the Benefits of a Money Back Policy?
Guaranteed Returns on Investments
A money back policy allows you to generate assured returns throughout the policy tenure.
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Additional Bonus Benefits
Many policies offer enhanced returns through bonuses when you pay premiums over several years.
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Tax Benefits
These policies offer tax benefits under Section 80C2 and Section 10(10D)2 of the Income Tax Act.
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Provides Financial Security
It secures the financial future of your loved ones when you cannot provide for them.
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Savings for a Specific Goal
It allows you to plan out your finances in advance and helps you to achieve specific objectives
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Provides Life Insurance Cover
Apart from its investment benefits, it also provides life insurance cover to the policyholders. To better understand how much coverage you need and to calculate the premium based on your financial goals, you can use a life insurance calculator. This tool helps you evaluate the right coverage amount and estimate the premiums that fit within your budget, ensuring you’re adequately protected while making informed investment choices.
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Offers Sum Assured
It provides the beneficiaries a fixed sum assured which is payable in multiple pay-outs at regular intervals.
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Provides Liquidity with Regular Pay-outs
The sum assured chosen by the policyholder is paid out in regular intervals throughout the policy tenure which provides liquidity to the policyholder.
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Comes With a Low-Profile Risk Instrument
Money back policies involve a lower degree of risk as they are not market-linked investments. Unlike stocks, bonds or mutual funds, money back plans are able to provide guaranteed returns at regular intervals during the policy’s term, such as monthly or annually.
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Understanding Money Back Plan with an Example
Let us understand how a money back policy works with the help of an example. Say for instance Mrs Rinika Mukherjee, a working lady avails a child money back policy. Assuming that the age of her child is 12 years, she purchases a policy with a sum assured of Rs. 30 lakh with a tenure of 25 years.
Hence, Mrs Mukherjee will have to pay a premium throughout the policy tenure. According to the policy, she will receive a survival benefit of 25% of the total sum assured after every 5 years.
Upon maturity, she will receive the last 25% of the sum assured along with any bonus if applicable. The sum assured will be paid out in multiple installments in the 5th, 10th, 15th, and 20th year and the last 25% will be paid in the 25th year along with bonuses if applicable.
In case of her unfortunate death any time within this period, her child will receive 100% of the sum assured amount plus all accrued bonuses. This is on top of any and all survival benefits already availed.
Eligibility Criteria for Buying Money Back Policy
Here are the eligibility criteria required to apply for a money back policy, which are as follows:
The age of the individual should be a minimum of 18 years and a maximum age of 55 to 65 years. Usually, the age bracket varies from insurer to insurer.
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The individual should also have a stable income flow and must be capable of paying the insurance premium on time.
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The policy term can be anywhere from 10 years to 25 years, but it cannot go beyond the maximum permitted age.
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Documents Required to Buy Money Back Policy
Listed below are the documents required to buy a money back policy:
Age proof: Any one of the following can act as an age proof- PAN card, voter ID card, passport, Aadhaar card, driving licence
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Address proof: Any one of the following can act as an address proof: Voter ID card, Passport, Aadhaar card, Driving licence and Central KYC Identifier.
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Income proof
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Medical reports or certificates, doctor’s prescription
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Policy application form carefully filled
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Child Money Back Plan
It is a kind of money back plan specially designed which makes use of survival incentives to cater to the financial requirements of growing children. Some of the education requirements can include higher education expenses, studying abroad expenses, marriage and various other factors depending on the child.
Moreover, it is a combination of investment and insurance which enables policyholders to secure his or her child's future along with assured return on investment. This dual benefit plan becomes beneficial and provides a sense of security to policyholders.
What are the riders available with Money Back Policy?
You can also add riders over and above the plan money back policy some of which are as follows:
Waiver of Premium
It allows the policyholder the facility to waive off their premium payment under several circumstances.
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Accidental Death Rider
In case of an accidental death of a policyholder, this rider provides a death benefit to the policyholder's beneficiaries.
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Terminal Illness Rider
This rider enables the policyholder with assured cash if he or she is diagnosed with a terminal illness such as heart attack, stroke, kidney failure etc.
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Hospitalisation Rider
It provides the policyholder financial assistance when he or she is hospitalised and provides cover for eligible treatments.
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Accelerated Sum Assured
If the Life Assured, or if more than one Life Assured the first to become critically ill of the Lives Assured, becomes critically ill by suffering one of the illnesses defined , a sum as specified in the Policy Schedule shall be payable.
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Critical Illness Rider
A critical illness rider financially empowers you to get the best possible treatment without worrying about costs, in case the Life Assured is diagnosed with a Critical Illness.
...Read More
How to Choose the Best Money Back Policy?
Here are some of the key parameters which must be taken into consideration to choose the best money back policy.
Financial Goals
The first and foremost thing to consider is your financial goals. This can include goals like buying a house, planning an expensive vacation, funding children's education, etc. Based on your medium and long-term financial goals, you can choose the most appropriate plan.
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Coverage
Based on certain factors like the standard of living of your family, living expenses, your contribution to the total family income, etc., you should determine the sum assured amount. This amount has to be enough to cover your family’s immediate and long-term needs.
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Policy Term
It is important to read the terms and conditions of a money back policy before finalising the same. There can be various exclusions in the policy which are not displayed at the forefront while advertising. It is best to read through all the terms and conditions to know the consequences of various situations you may face.
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Premium Amount
It is also another crucial factor to consider and you must choose the amount of premium in such a way that it does not feel like a financial burden to you.
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Riders
Some of your insurance requirements may not be covered in the base policy such as critical illness coverage, accidental death cover, etc. Therefore, choose riders wisely over the base policy based on your financial needs and affordability.
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Company's Claim Settlement Ratio
Consider checking the claim settlement ratio of the insurance company. It is a figure denoted in percentage which reflects how many claims it has settled out of 100. Hence, the higher it is the more the chances for the policyholder that the claim will be settled.
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Benefits of Buying Money Back Plan from HDFC Life Insurance
When you avail a money-back plan from HDFC Life Insurance, you can enjoy assured advantages, including:
- No commission fees
- Access to expert advice at no additional cost
- Transparent process with no hidden charges
- Genuine transactions without any spam calls and all phone call conversations from HDFC are recorded for 100% transparency.
- The reliability of an insurer with a death claim settlement ratio of 99.50%##.
Factors to Consider while Purchasing a Money Back Policy
Listed below are some of the factors to keep in mind while purchasing a money back policy:
Understand the Features
Make sure that you understand all the features of the policy properly. In case you find any difficulties, you can reach out to our advisors by requesting a call back from our website. They will explain to you the details and resolve your queries.
...Read More
Premiums
You must choose the amount of premium in such a way that it does not feel like a financial burden. Also, many insurers offer the flexibility of multiple premium payment options like monthly, quarterly, semi-annually or annually. Make sure to pick a plan that provides the best value for your premium.
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Evaluate the Returns
After finalising the sum assured and choosing the premium amount, determine the returns you will receive as money back. You can reach out to our advisors by requesting a call back from our website. Knowing these beforehand can help you make an informed decision.
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Check the Exclusions
It is always recommended to check for the exclusions of a policy as some companies do not explain such things upfront while promoting their insurance products. There can be several exclusions in the base policy but you can opt for a rider to get additional benefits.
...Read More
Financial Goals
It is extremely important to consider your financial goals and objectives before availing of a money back policy. Identify the objective and choose the policy based on it.
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Sum Assured
It is an amount which is paid to the family member or beneficiaries of the policyholder in the event of the unfortunate demise of the policyholder. Hence, it is one of the crucial aspects to consider when choosing a money back plan.
...Read More
Additional Benefits
There can be some additional benefits like bonuses and other perks which makes it a lucrative deal for the policyholder. Hence consider what riders you are allowed to add to your base policy.
...Read More
Things to Consider Before Buying a Money Back Plan
Purchasing a money back plan seems like a feasible option in case you are seeking guaranteed returns at regular intervals, coupled with growth potential during the tenure of the policy. However, before selecting any money-back plan, it is crucial for you to consider the following aspects:
- Have a clear understanding of how a money back plan works.
- Analyse your financial expectations from the policy, such as returns, and then see if they match with the money back policy’s benefits or not.
- Assess your risk taking ability as an investor, as both overestimation and underestimation of risk can affect your return expectations from the money back policy in the long run.
Why Buy a Money Back Plan from HDFC Life Insurance?
With a Money Back Plan from HDFC Life, you can get periodic income and life insurance coverage from one of India's leading insurance companies. Plan your family's future by opting for one of the individual or group insurance plans that meet all your needs.
Why buy term insurance, from us? Check the reasons:
We have settled 99.50%## of all individual claims.
All claims are processed within 24 business hours
Flexibility in the choice of benefits
Tax savings on premiums and maturity benefits
Child plans to fulfil all your little one’s dreams
Live a stress-free life by choosing one of our money back plans!
Comparison between Fixed Deposit (FD) and Money Back Policy
Here is the comparison between a fixed deposit and a money back policy demonstrated in a tabular form, based on certain parameters.
Parameters |
Fixed Deposit |
Money Back Plan |
Investment Type |
FD is a fixed investment option offered by banks, under which it accepts deposits and provides stable returns. |
It is a type of life insurance plan which provides life coverage along with a regular pay-out. |
Returns |
Fixed-rate of interest |
There are no such interest rates but the returns are assured |
Policy Term |
Tenure ranges from 7 days to 10 years offering flexibility to the customers |
It is usually available for a longer period. It can range from 10 to 30 years |
Investment Required |
Minimum investment ranges from Rs. 1,000 to Rs. 5,000 with no upper limit |
The amount of premium depends on certain factors such as the sum assured, riders, age, etc. |
Pay-out Mode |
Lump sum pay-out upon maturity |
Pay-outs take place at regular intervals |
Withdrawal |
Premature withdrawals are allowed by a penalty on interest levied |
Withdrawals are allowed before the policy maturity but it varies from insurer to insurer |
Tax Benefits |
Except for tax-saver FDs. they are not eligible for tax deductions |
All plans are eligible for tax benefits under Section 80C and 10(10D) of the IT Act. |
Is Money Back Policy a Good Investment for You?
A money back plan can always be the perfect investment if you are looking to invest in low-risk savings that provide life insurance coverage. These are safe long-term savings plan which primarily invest in debentures of private entities and government bonds.
It is even more liquid than a typical long-term debt investment because of its money back feature which provides a stable return in a fixed interval. Utilise it to establish a reliable source of tax-free income. At the same time, it also serves as an ideal tool for transferring wealth.
As it carries very low risk compared to a mutual fund, it can be one of the best life insurance plans for a conservative investor with a secured return on investments along with tax benefits. All these as a whole make a win-win situation for the investor as well as for his or her beneficiaries.
FAQs on Money Back Policy
1 What is a money back policy?
A money back policy is a form of life insurance which offers dual benefits to the policyholder. Along with providing a life cover, it also provides fixed returns in intervals. Hence, a person can enjoy stable returns along with a sense of security as it offers death benefits to his or her beneficiaries.
2 What are the features of a money back policy?
Some of the key features of a money back policy are- low-risk investment, regular income source, survival benefit, death cover, surrender value, add-on riders.
3 What are the advantages of a money back policy?
Some of the primary advantages of a money back policy are- financial security, guaranteed returns, regular payouts, savings for specific goals, etc.
4 Is money back policy taxable?
The amount received as periodic payouts is generally not taxable. However, it’s advisable to consult a tax advisor to understand your tax liability.
5 Is it risky to invest in a money-back policy?
Money-back policies use compounding interest to provide returns and savings. These policies are generally not considered risky.
6 Is there a penalty if I do not pay my premium for the money-back policy on time?
Failure to pay timely premiums may lead to policy lapse or discontinuation. It’s crucial to adhere to the premium payment schedule to avoid such situations.
7 Who is most suitable to buy a money-back policy?
Money-back policies work best for individuals who want insurance coverage and periodic returns. They are particularly beneficial for those with specific financial goals in mind.
8 What are the riders available in a money back policy?
Typically, you can opt for accidental death, critical illness, and disability riders3 with your money-back policy.
9 Can I revive my money back policy?
Yes, most insurance companies offer a revival period during which you can reinstate a lapsed policy by paying the outstanding premiums and fulfilling certain conditions.
10 How do I surrender my money back policy?
Some individuals may choose to surrender the policy before maturity. They can contact the insurance company directly to receive the necessary paperwork.
11 How frequently am I required to pay the premium for a money back policy?
The premium payment frequency can depend on the insurer. Some insurers offer you the flexibility of monthly, quarterly, semi-annual or annual premium payments.
12 What happens if I fail to pay my money back policy premium on time?
If you fail to pay the premium amount for a money back policy within the grace period, there will be a policy lapse. When this happens, the perks and benefits of the policy will cease.
13 Is a money back policy a good investment?
Yes, it can be a perfect investment option for a conservative investor whose risk appetite is low as it pays out stable and assured returns on a regular interval. Also, it is not linked with the market.
14 How do I transfer my money back policy?
Transferring a money back policy is not possible as of now. However, you can surrender your existing policy and receive an assured surrender value.
15 How are returns calculated on your money back policies?
Money back policy returns are typically calculated by considering factors such as the premium amount, policy duration, and the assured sum.
Here's all you should know about Saving Investments.
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1. Guaranteed Benefit is paid on survival during policy term provided all due premiums are paid during the premium payment term.
2. Tax benefits are subject to conditions specified u/s 80C and u/s 10(10D) and other provisions of the Income Tax Act, 1961. Tax Laws are subject to change from time to time.
3. This applies to Income Variant, whereby guaranteed income is paid on survival of Life Assured during the policy term, provided all due premiums are paid during the premium payment term
HDFC Life Sanchay Plus (UIN:101N134V24) is a non-participating, non-linked savings insurance plan.
HDFC Life Sanchay Fixed Maturity Plan (UIN:101N142V07) is a Non-Linked, Non-Participating, Individual, Savings, Life Insurance Plan. Life Insurance Coverage is available in this product.
##Individual death claim settlement ratio by number of policies as per audited annual statistics for FY 2023-24.
^. Save 46,800 on taxes if the insurance premium amount is Rs.1.5 lakh per annum and you are a Regular Individual, Fall under 30% income tax slab having taxable income less than Rs. 50 lakh and Opt for Old tax regime.
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