A money-back policy, unlike a traditional insurance plan, facilitates the insured person with regular payouts, including survival benefits that are guaranteed and distributed evenly over the whole course of the policy.
These features make a money-back policy a great option for someone who wants to enjoy the benefits of an insurance policy while maintaining regular liquidity. Let’s see some in-depth concepts of money-back policy and how one can avail its maximum potential by knowing how to save income tax through it.
Reasons To Get A Money Back Policy
A Money back policy is the most popular option among Indian citizens when it comes to enrolling in an insurance policy. There are several major reasons behind it, according to several financial experts that we’re going to share below:
Insurance and Savings Benefits: A money-back plan is capable of providing regular returns on investments made by the insured person, along with insurance cover for themselves, that too for the premium payments of a single plan.
It’s the combined benefit that makes these plans so approachable for Indian consumers.
The insured person gets regular payouts on the investment and also gets an additional amount under survival benefits that starts after a few years of policy enrollment, throughout the lifetime of the policy, which can also be considered as a reward amount that the insured person gets for surviving.
Regular Payouts for Daily Expenses: The money-back policy pays at regular intervals, throughout the policy tenure. However, these regular payments are not random amounts and instead are a calculated capital, determined by taking account of all insured expenses, along with other major considerations. With these regular payouts in hand, you can always ensure that your daily expenses are covered.
Low-Risk Commitment: The investment aspect of money-back plans features several low-risk portfolio strategies that help you enjoy capital growth in the long run. As an insured individual, it helps you to generate a regular income stream and when the need of required income threshold is covered, you can also have an appetite to earn a huge sum, depending on the market trends.
Consistent Income with Survival Benefits: This is one of the amusing features that attract most people to money back plan. Along with regular returns on investments and insurance benefits with added tax exemptions as per the old regime, the insurer also provided additional survival benefits if you survive throughout the policy tenure.
Enhanced Death Coverage: In a money-back policy, if the policyholder faces death uncertainties then the nominee of the insured gets the whole assured sum without questioning the amount that is already paid through the survival benefits from the insurer.
This process is mentioned on the policy terms and compulsion from the Insurance Regulatory and Development Authority(IRDAI) as death coverage.
Better Than Traditional Plans: The features of a money-back policy are vast in comparison to other traditional policies. The benefit offerings of a money-back policy are mentioned below:
- Money back policy facilitates insured with all insurance cover and incentives during the policy term
- The additional benefits provide regular income over the whole policy tenure
- It facilitates the insured with both an insurance policy as well as a long-term high return margin investment option
- It covers a vast field of tax benefits with appropriate measures
- Low-risk investment when compared to other similar options like mutual funds
- Money back policy enables long-term saving potential along with a regular income stream
- It majorly focuses on regular liquidity flow hence the amount disbursed regularly.
- It also provides various rider benefits that cover common uncertainties.
Availability of Riders: Money-back policies also provide the option to add extra required coverage that is not originally presented in the policy paperwork. Referred to as Riders, the list of their benefits is very large and depends on the insurer’s appetite. Here’s a list of some common riders available within these plans:
- Accidental Death Rider – It covers the insured nominee and family in case of sudden accidental death or disability. The nominee of the insured person or in case if the nominee is not there then family members get a lump sum amount as an additional benefit and the terms notified in the policy paperwork.
- Healthcare Rider – If the insured person, during the event of any specific conditions, faces hospitalization, then the assistance in bill payments is covered inside the policy terms.
- Critical Illness Rider – It also facilitates insured persons to provide all required assistance in case of any specific or critical illness.
- Premium Waiver Rider – It provides the insured personal facility to waive the entire premium under certain circumstances but can also avail policy coverage till promised period.
How to Save Income Tax with a Money Back Policy?
If a person has enrolled in a money-back policy then they can avail of various tax saving options under three sections of the Income-tax act that are Section 80C, Section 80D, and Section 10(10D). Under 80C the maximum deduction available is up to 1,50,000.
Similarly, in 80D it is up to 25000 if the insured person is younger than 60 years. If above 60, then it is 50000 and in case both insured and parents are above 60 years of age then it goes to 1,00,000. In Section 10(10D) if a person does not provide a pan card then TDS is 20%.
Conclusion
Money back policy is one of the best investment options, as compared to traditional policies. Not only because it provides the facility to avail regular income options, these plans even provide both investment and insurance options and also come with vast benefits and features.
The low-risk investments make it a great option over mutual funds and insurance benefits are far more than any other insurance scheme. Money back policy also helps to save tax to a large extent. So, all the benefits accumulated make it a popular investment policy.