Definition
Money-Back Plan
A money-back plan is a life insurance policy that returns a portion of the sum assured at regular intervals during the policy term.
A money-back plan is a variant of an endowment policy that pays periodic survival benefits — a percentage of the sum assured at set intervals through the term — while still providing life cover. On death, the full sum assured is usually paid regardless of the instalments already received.
It appeals to those who want regular cash inflows along with insurance, but like endowment plans its returns are generally low because of the savings-plus-insurance bundling and conservative investment.
As with endowment plans, planners often suggest that buying term insurance for protection and investing separately yields better outcomes, unless the predictable periodic payouts genuinely match your needs.
Related terms
- Whole Life InsuranceWhole life insurance is a permanent life policy that provides cover for the insured's entire lifetime, often up to age 99 or 100, rather than a fixed term.
- Endowment PlanAn endowment plan is a life insurance policy that combines a death benefit with a lump-sum savings payout at maturity if the policyholder survives the term.
- Term InsuranceTerm insurance is pure life cover that pays your family a large sum if you die during the policy term, in exchange for a low premium.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.