Welcome to our blog, where we delve into the world of money-back policies! If you're looking for a comprehensive and insightful guide on this topic, you've come to the right place. A money-back policy is an insurance product that provides a guarantee of a certain amount of money back to the policyholder at the end of the policy term. This can be a valuable option for those who want to safeguard their finances and ensure they have a safety net in case of unforeseen circumstances. In this blog, we'll explore the intricacies of money-back policies, including their features, benefits, and drawbacks. By the end of this article, you'll have a solid understanding of what a money-back policy is and whether it's the right option for you. So, let's dive in!

What is Money-back Insurance policy?

Money back insurance policy is a special form of life insurance policy where the insured receives a part of the sum assured as a regular installment rather than receiving a lump sum at the end of the policy period. In fact, a money-back insurance policy acts as an endowment scheme with liquidity.

Features of a Money Back Insurance Policy

  1. Money Back Plan Offers Assured Returns

A money-back policy provides guaranteed returns and is an ideal investment for people looking for a safe and secure option. It also provides insurance coverage, making it a great choice for those seeking definite returns. If you're seeking secure and dependable returns, a money-back policy can be a great investment option. The returns are not affected by the variations in the equity market, which means you'll receive a guaranteed return regardless of how the market is performing.

2.  Death Benefits:

If the policyholder passes away, the nominee of the money-back policy will receive the sum assured and any bonus. This policy is like a life insurance plan that secures your family's future even if you're not there. It's a guaranteed plan, so the nominee will definitely receive money.

3.   Optional Riders to Enhance Your Money-Back Policy Coverage

As an add-on to money-back policies, insurance companies provide optional riders that policyholders can opt for. These riders can be related to specific medical conditions, like critical illnesses, or riders like waiver of premium are also offered

4.   Lifetime Income from a Money Back Plan

Money-back policies provides a guaranteed source of income for policyholders at regular intervals. The survival benefit feature enables policyholders to accumulate a corpus of funds that can be utilized for various expenses such as travel, education, or unforeseen events. This unique feature makes money-back plans an attractive option when compared to other life insurance plans available in the market.

5.   Bonus Amounts:

A money-back insurance plan is a type of participating policy, where the policyholders have the possibility of receiving a bonus amount upon maturity. However, it is essential to keep in mind that the bonus is only given if the insurance company's investments have yielded profits and the policyholders have made timely premium payments.

What are the applicable riders in Money back policies?

Money back policies offer a variety of riders that can be added to the base policy for a small additional premium.

Riders can help increase coverage and protect against various risks in life.

Critical illness rider provides a guaranteed cash sum in case the insured is diagnosed with a critical illness, such as heart attack, cancer, paralysis, or organ failure.

Accident or disability rider pays a part or the entire sum assured amount in case of temporary, partial, total, or permanent disability or death resulting from an accident.

Waiver of premium rider prevents loss of the insurance cover if the insured is unable to pay the premium due to illness or any other reason.

Riders offer extra protection and can be beneficial in case of unforeseen events.

How Does a Money-Back Insurance Policy Work?

A money-back insurance policy provides the policyholder with survival benefits, investment opportunities, and maturity benefits. Here's how this type of policy works:

Plan for your financial goals: You can use a money-back policy to plan for financial goals like your child's education or your retirement.

Buy the policy: Suppose you want to buy a child money-back plan. You purchase a money-back policy for a sum assured of Rs 40 lakhs in 2021, with a policy tenure of 25 years. You will pay a premium throughout the policy tenure.

Receive survival benefits: As per the policy terms, you will receive survival benefits of 20% of the sum assured (Rs 8 lakhs) every five years. For example, in the fifth year, you receive Rs. 8 lakhs, which you can use for your child's tuition fee.

Use the payouts: You can use the payouts you receive at various intervals for different purposes. For example, you can use the second payment of Rs. 8 lakhs in the policy's tenth year for your child's higher education. The third payment of Rs. 8 lakhs can be used for your child's marriage expenses when they turn 27. The fourth payment of Rs. 8 lakhs can be kept for your retirement purposes.

Receive maturity benefits: On maturity, you will receive your last 20% along with any applicable bonus. In this case, you will receive the remaining Rs. 8 lakhs from the policy, plus any applicable bonuses, in the 25th year of the policy.

Death benefit: In the unfortunate event of your passing during the policy term, your nominated beneficiary will receive a lump sum of Rs. 40 lakhs along with any accumulated bonuses, and the policy will cease.

In summary, a money-back insurance policy is an excellent investment option for those looking to plan for their future financial goals. With this policy, you can receive survival benefits and maturity benefits while securing your loved one's financial future in case of any unfortunate event.

Benefits and Components of a Money-Back Insurance Policy

  1. Policyholders Stand to Gain from Survival Benefit

A money-back insurance policy pays a portion of the sum assured to the policyholder at regular intervals during the policy term. For instance, a policyholder may receive 10-15% of the sum assured after every 5 years until the policy matures. At maturity, the policyholder receives the remaining sum assured plus any applicable bonuses.

A money-back plan provides returns after a few years of investment. The payouts are made every few years during the policy term, and the remaining benefits are paid upon maturity. Insurance companies offer this benefit in two stages - survival benefits paid every few years and a larger final payout at maturity. Survival benefits are only given if the individual who is insured manages to stay alive. If any unexpected circumstances occur, the beneficiaries will be compensated with the assured sum along with any additional bonuses.

2.   Maximizing the Value of Money with a Money Back Policy

Money-back plans may not offer high investment returns, but they provide three-way payouts, including survival benefits, a sum assured at maturity, and a bonus. The value of the survival benefits is particularly significant, as inflation reduces the value of money over time. Even your favorite dish at a restaurant now costs more than it did a few years ago. So, payouts received earlier in the policy period are worth more due to the decreasing value of money.

3.   Market-Linked Investments Lose Ground Against Money-Back Plans

Adding a money-back plan to one's investment portfolio is a wise decision as it protects against market volatility. Even the best investments in the stock and commodities market are not immune to market fluctuations. With a money-back plan, individuals receive guaranteed returns on their investment and insurance coverage to safeguard against any unforeseen events. The survival benefits received at different stages of the policy can be used for expenses or investments like paying off loans, purchasing real estate, and more.

4.   Death Benefits

In case of the unfortunate event of the insured person's passing, the nominee of the policy will receive the death benefit. This benefit includes the sum assured and bonus accumulated on the policy up to the date of the insured person's death. However, the survival benefits, which are only paid to the insured person while they are alive, are not included in the death benefit. For instance, if the insured person passes away before receiving any survival benefits, the nominee will only receive the sum assured and bonus amount accumulated up to the date of the insured person's death, and not the remaining survival benefits.

5.   A Tax-Saving Advantage of Money-Back Plans

Money-back policies come with a tax-saving benefit under section 80C of the Indian Income Tax Act, given that the premium amount is less than 10% of the sum guaranteed. If the sum assured is more than five times the premium paid, the maturity amount will be exempted from tax deduction at source. This tax benefit can enhance the overall returns of the policyholders, especially those who prefer secure and guaranteed returns. Opting for a money-back policy can help them save on taxes while also availing of survival benefits, assured sum at maturity, and bonuses from the insurance provider.

How to Choose A Money-Back Policy?

When choosing a money-back policy, you need to consider the following factors:

  1. Determine your financial goals for the upcoming years.
  2. Evaluate how much money you have available to invest in a money-back policy.
  3. Decide on the investment duration.
  4. Determine the type of payouts you expect to receive.

Other than these factors, you must also consider the policy tenure, which is typically 20 years. It is important to understand how much of the sum assured will be paid out in installments to cover any future expenses. Making an informed decision based on these factors can help you choose the best money-back policy to meet your investment needs.

Money back policy Vs. Term Insurance plan

Money back policies and term policies serve different purposes, and which one is better depends on your individual needs and circumstances.

Money-back policies provide a lump-sum payout at regular intervals during the policy term while also offering life insurance coverage. This type of policy is designed to provide both protection and savings and can be beneficial for individuals who want to plan for specific financial goals, such as their children's education or retirement. However, money-back policies tend to have higher premiums and lower returns compared to other investment options. At the same, the protection component i.e. Insurance coverage is much less in case of a money back policy.

On the other hand, term policies offer life insurance coverage for a specific period of time, typically 10, 20, or 30 years. They do not offer any savings component and are designed to provide a large payout to beneficiaries in the event of the policyholder's death. Term policies are often more affordable than other types of life insurance, making them a popular choice for individuals looking to protect their loved ones without breaking the bank.

In summary, money-back policies are better suited for individuals who want both life insurance coverage and a savings component, while term policies are a good option for those seeking affordable life insurance coverage without the added savings component. It's important to carefully consider your own financial goals and needs before choosing a policy.


In conclusion, a money-back policy is a valuable feature that offers customers peace of mind when making purchases. With its promise of a full refund, this policy incentivises consumers to take a chance on a product or service they may have otherwise hesitated to try. However, it is important for businesses to clearly communicate the terms and conditions of their money-back policy to avoid any misunderstandings or disputes. By providing a clear and fair policy, businesses can build trust with their customers and create a positive reputation in the marketplace. Ultimately, a well-executed money-back policy can lead to increased customer loyalty and a stronger bottom line.