Another incentive article has been brought to your eyes by your very own insurance blog, InsuranceforAll.
On this article, I'll be shedding light on the utmost important parts of Money-back Policy that you need to know if you're a pioneer in the ‘world of insurance’. Kindly read through carefully.
Based on the money-back policy, I'll be talking about;
• What is Money-back Policy?
• How does Money-back Policy work?
• Why Do You Need Money-back Policy?
• Benefits Of Money-back Policy
• Things To Consider Before Purchasing a Money-back Policy
• Features Of Money-back Policy
Let's get into it.
WHAT IS MONEY-BACK POLICY?
Money-back policy is a life insurance product/policy that offers life coverage during the tenure of the plan and most times, survival or maturity benefits after the end of the plan term is reached.
It allows the disbursement of regular returns, or a huge sum amount at a specified time during the period of the plan to the insured.
In this policy, the returns accumulated and offered can depend on the performance of investment, or can be guaranteed. In some cases, it can be both.
Luckily, this feature allows you to purchase a suitable money-back policy for your individual financial goals.
This policy is also mostly purchased for children.
But in their case, it is termed as "child money-back policy".
The policy is an investment and insurance plan, making it so beneficial to pioneers.
HOW DOES MONEY-BACK POLICY WORK?
A standard life insurance policy pays out a huge amount to the beneficiaries of the insured in the case of his/her demise. This is widely known as death benefit.
Meanwhile, a money-back policy is also a form of life insurance but in this policy, the insured recieves portions of the benefit at regular time intervals instead of getting a huge sum at the end of the policy.(Or after his/her demise.)
So, money-back policy could be said to be a regular compensation scheme for the insured, pending the time of the policy's maturity.
In the duration of the plan, the amounts paid out to the insured is known as "Survival benefits" and the remaining sum accumulated( if any), is paid out as maturity benefits, or as any other incentives.
WHY DO YOU NEED MONEY-BACK POLICY?
I recommend that everyone financially capable should purchase money-back insurance policy for their kids.
I am not just saying this because i feel like, there are almost a thousand and one reasons for the need to purchase money-back policy.
I will do you the favour of opening your eyes a little on this part of the policy.
Here are some vital reasons why you should consider money-back policy.
- Future Security: A good child money-back policy can help you in the bid to secure your child(ren)'s future. However, depending on your life stage at the time of the insurance plan purchase, different types of money-back plans can be very appealing and smart.
- Investment Opportunities: Recall that i said this policy is not only an insurance plan but also an investment avenue.
In the duration of the plan, policyholders receive a guaranteed return for their investment, which in turn causes increment in their wealth - a good investment.
- Guaranteed income and Security: For those seeking future security and present income, money-back policy is no doubt the best for you. This is because the policy includes a stable investment return, and still offers annual payouts as well as insurance coverage.
BENEFITS OF MONEY-BACK POLICY
Money-back policy has a ton of benefits, no doubt.
You're about to learn a few of them.
1. Maturity Benefits
This benefit is paid to the insured individual when the money-back plan is 'matured', and this benefit consists of two forms.
The Sum Assured and the Bonus.
Sum Assured is the complete coverage amount that the insured selects at the commencement of the plan, while Bonus is the insurance company's reversionary benefits which is declared that has been stacked up over time. This benefit is also determined and realised by the insurance company's performance.
2. Survival Benefits
This benefit is paid to the policyholder every few years over the duration of the policy.
Right from the inception of the policy, the payments begin within a few years and this lasts till the maturity of the policy.
Let me give you an example for this.
Mr Henry chose the money-back policy with a sum assured of $10,000 over a 25-year period.
He will have to pay a 25-year premium and receive a portion of the sum he's assured at regular intervals.
He may recieve 20% of the assured sum as a survival benefit probably after the 10th, 15th and 20th year of the policy respectively, depending on the terms of the policy.
If calculated, the survival benefit is 20×3 =60% of the assured sum, and he will also receive the 40% of the amount guaranteed that is remaining, even plus any bonus, at the policy's maturity.
3. Death Benefits
In the case of the insured's demise, the designated beneficiaries will be given a payout known as the death benefit. This benefit includes the assured sum and any bonuses stacked up on the policy.
It is important to note also that this benefit does not in any way include the survival bonus - that of which is paid to the insured only when they are alive.
4. Tax Benefits
This benefit is not universal as it stands, but in countries where it is present, it allows the insured to deduct up to a certain amount in his/her life insurance premium and from the taxable incomes annually.
Also, in most cases, the maturity benefit from money-back policy is exempted in taxation.
THINGS TO CONSIDER BEFORE PURCHASING A MONEY-BACK POLICY
As an investor seeking guaranteed and stable returns at specified periods of time in your life to cover expenses that may fall out in the future, or you seek returns with noticeable growth potential, purchasing a money-back policy is a good idea, if not the best!.
Well, in as much as a money-back policy is good for everyone, checking out some things won't hurt, as it is very vital to get the understanding of a few things beforehand. Let's look at them.
-The first thing to do before venturing into any business or avenue is to have adequate knowledge of the said business. It is no different in money-back policy also.
- Checkout your financial capability and your level of expectation and see if there's a potential win/profit for you in the money-back policy.
- Take a close look and observe your ability as an investor in taking risks - this is because in every investment program, overestimating and underestimating can cause potential damage to your investment returns, so it is advisable to be watchful and vigilant.
FEATURES OF MONEY-BACK POLICY
Ever since I've been explaining the money-back policy, if you read carefully, you'd have seen the features already.
But if you didn't, no cause for alarm. I still got you covered. *haha*
1. Income At Intervals During The Policy Term: It is the work of money-back policy to ensure that the insured earns the sum assured every few years. So, the survival value is stacked up every few years and is being given to the insured, providing him/her with another source of income.
On most occasions, this payout is important, as it can help in paying off your children's school fees, making down payment for the purchase or rent of an apartment, boost your lifetime savings, or even going on a luxury vacation.
2. Stable/Guaranteed Returns: As the name implies, money-back policy means that money is given back to the insured as a survival benefit, if the insured should survive the set period.
However, in the case of not surviving, the money is given to the selected beneficiaries in the policy including stacked up bonuses. This is the same way it works for child money-back policy as well.
3. Bonus Amounts: The benefits of money-back insurance policy is much, i must say. This is because the policy still contributes in the growth of the income of the insured by adding bonus amounts. The total incentive is calculated annually, as a percentage of the guaranteed returns by the insurance company and therefore accumulated.
In the event of the insured's demise or the maturity of the policy, the bonuses stacked up are added to the total guaranteed payout.
4. Addition Of Riders: Many insurance companies offer sale of add-on riders that are optional, for the benefit of the insured.
These add-on riders may offer coverage for medical issues like illnesses, personal accidents, etc.
