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What's a Money Back Policy and Why do You Need One?

What's a Money Back Policy and Why do You Need One?

People choose various methods to invest money with zero or little capital loss. Insurances are one of those modes of investment with low risk of capital loss. Life and health insurance policies provide life and health coverage and some life insurance plans also offer return on investment. So, insurance serves two purposes at the same cost. Read on to know more about the money back policy and why you need one.

Money Back Policy

You can separate most insurance and investment schemes into two major types. Unit-linked and non-unit linked. Unit-linked schemes invest the investors’ money into growth-oriented products such as stocks, mutual funds, etc. They have the potential to increase or even double your investment in lesser durations. But there are several risks in such a scheme where the returns on invested capital is uncertain. Non-unit linked schemes are like fixed deposits in a bank. In these schemes, the growth may be limited, but there are no risks to the invested money.

Money back policy is such a non-unit linked investment scheme that secures the invested money. Insurance schemes are a major type of money back policy schemes. They can provide benefits like health & life coverages, maturity benefits, lumpsum benefits or lifelong monthly income. Below is a brief explanation of the main advantages of money back insurance policies.

9 Reasons Why You Need to Have a Money Back Policy

The main benefit of a Money back policy, as the name suggests, is that it gives the invested money back. There are also several other benefits to money back plans integrated with life insurance plans. The following are the main 9 benefits of investing in money back plans.

Assured Sum

With money back plans, the insurance provider guarantees the invested money. You can remain worry-free because of the money back clause at the policy’s maturity. It will protect your investment from the risk other schemes face due to market fluctuations. You will get your invested money at the end of the term. Some long-term policies of 20 or more years also provide partial returns periodically, such as every five years. You can opt for this feature to get investment returns in a short duration of time.

Life Coverage

All life insurance money back plans have life coverage in case of the sad demise of the insured person. The spouse, close family, or nominees receive the policy’s life coverage benefits. Such schemes are extremely beneficial if the insurer is the family’s sole earning member. In those cases, the life coverage money can be useful in covering the family’s expenses. It gives financial support to the insurer’s family and children in the future.

Health Coverage

Some money back plans are also linked with health coverage besides life coverage. So, in case of an accident or illness, the insured can claim this health cover. It protects the insured from financial debts due to an unexpected and expensive treatment. You can also use this money for day-care, non-allopathy treatments, tests, and reports. Such extra health insurance cover also often comes with the added benefits of regular free health check-ups. It is also beneficial to have a single policy that gives both health and life coverage.

Low or Zero Risk Investment

As mentioned earlier, there are low or zero risks in investing in a money back policy. You don’t have to worry about your returns if the policy includes a money back clause. The insurance provider is bound to give you back your entire investment because of the terms and conditions.

Lumpsum Returns

A lumpsum return is a great advantage of a money back scheme. You can use this huge amount of money however you wish. Several people invest in money back policies for the anticipated family expenses. They use the returns for their children’s education, marriage, or business investment. You can even use this money as a backup saving plan because such policies give the facilities of partial withdrawal.

Endowment Benefits

Many people use guaranteed returns policy as investment to their retirement fund. After the term is over, they can either take the money as a lump sum, or they can opt to receive a part of the money at maturity and the remaining as monthly or annual incomes. These become helpful during retirement when a person has no other income source. They can use this money for their day-to-day expense or savings during some unforeseen situations.

Added Bonuses

Money back insurances also have several other benefits. They can have extra returns like other life insurances, giving up to 30% returns or more depending on the provider. Apart from returns, they can also have the benefits associated with various extra insurance covers.

Tax Exemption on Premium Payments

The premium payments for money back insurance schemes are tax exempted, according to Section 80C and 80D of the Income Tax Act, 1961, and subject to conditions mentioned therein. You can claim up to ₹1,50,000 per year while filing your ITR. Thus, it will decrease your taxable income up to ₹1,50,000. It is a great feature of insurance added to the money back investment scheme. However, these laws are subject to change from time to time.

Tax Exempted Assured Sum

The assured sum from the money back policy is also exempted from tax. But tax exemption is only applicable for the invested amount and not for any extra returns. Returns are a type of interest, and all interest incomes are taxable. So, you will have to pay taxes on the returns according to the income tax rules, rates and your age.


*Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time
The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale.
Make responsible financial decisions. Consult with your financial advisor before making any decisions on insurance purchase.

Suggested Plans

Bharti AXA Life Smart Invest Guaranteed Plan

  • A Non-Linked, Non-Participating, Life Insurance, Individual Savings Product
  • Guaranteed Financial Returns (Provided policy is in force and all due premiums have been paid)
  • Option to choose from 2 plan variants
  • Flexibility in Policy Term/Premium Payment Terms

Bharti AXA Life Shining Stars

  • Non-linked, non-participating limited pay endowment Life Insurance plan
  • Designed to take care of the financial needs of your child.
  • Flexibility to opt between 2 Maturity Payout Options
  • Flexibility in Policy Term/Premium Payment Terms
  • A great short-term investment option for a child insurance policy.

Bharti AXA Life Super Series

  • A non-linked non-participating individual life insurance savings plan
  • Range of investment duration and returns
  • Guaranteed money back benefits (provided policy is in force and all due premiums have been paid)
  • Income tax benefits (as prevailing tax laws in India that are subject to changes)