Money back life insurance is a type of life insurance policy that provides a guaranteed cash payout at specified intervals throughout the term of the policy. Generally, the intervals are every five years and, in some policies, even annually. These payments could be tax-free and can be used for any purpose like paying off loans, children's education, or investments.
How Money Back Life Insurance Works?
Money back policies offer life insurance coverage for a fixed term with a payout if the policyholder dies during that term. If the policyholder survives the term, they receive a portion of the premium paid back. The total coverage is usually less than a traditional term insurance policy due to periodic payouts.
Select a money back life insurance policy that suits your financial goals and protection needs.
Pay regular premiums to keep the policy active and ensure the financial security of your loved ones.
Throughout the policy term, you will receive periodic payouts, providing you with liquidity for various expenses.
Benefits of Money Back Life Insurance
Money-back life insurance offers regular payouts, savings, liquidity, tax benefits and death benefits, providing the benefits of both insurance and investment. It's a popular choice for many individuals.
Your loved ones are financially protected in the event of your demise, ensuring their well-being.
Liquid Cash Flow
Periodic payouts provide a regular income stream to meet your financial needs and aspirations.
You have the flexibility to choose the policy term and payout frequencies based on your financial goals.
Even if you survive the policy term, you still receive a portion of the sum assured as a survival benefit.
Drawbacks of Money Back Life Insurance
Money back life insurance provides periodic payouts of the sum assured rather than a lump sum at the end of the policy term. Despite its appeal, this policy comes with drawbacks such as higher premiums due to higher risk, a reduced return on investment if the policyholder survives, and insufficient coverage for long-term financial needs.
Compared to other investment options, money back life insurance may offer lower returns.
Money back policies usually have longer tenures, which may not align with your short-term financial goals.
The premium for money back life insurance policies is generally higher compared to traditional life insurance.
Comparison With Traditional Life Insurance
Money back life insurance and traditional life insurance are two different types of life insurance policies.
Money Back Life Insurance
Money back life insurance differs from traditional life insurance in that it provides periodic payouts in addition to the death benefit. This makes it suitable for individuals who want both financial protection and liquidity during the policy term.
Traditional Life Insurance
However, traditional life insurance policies may offer higher coverage amounts and lower premiums. It is essential to evaluate your financial goals and requirements before choosing the right policy.
Tax Benefits of Investing in Money Back Life Insurance
Money Back Life Insurance Policy provides various tax benefits under the Income Tax Act 1961.
Premiums paid towards Money Back Life Insurance Policy are eligible for a deduction under Section 80C of the Income Tax Act. Deduction under this section is subject to certain conditions.
The maturity proceeds from the Money Back Life Insurance are tax-free under Section 10D of the Income Tax Act. However subject to certain conditions.