Definition
Money-Back Policy
A money-back policy is an endowment-style life plan that returns a portion of the sum assured at fixed intervals during the term, with the balance plus bonuses paid at maturity.
Money-back policies appeal to Indian buyers who want periodic liquidity rather than a single maturity lump sum. A typical design pays out, say, a fixed percentage of the sum assured every few years as survival benefits, returning the remainder along with accrued bonuses at the end of the term.
If the policyholder dies during the term, the nominee usually receives the full sum assured irrespective of the survival benefits already paid out, which is a key marketing point. As with endowment plans, the savings component grows slowly because of high allocation to cover and expenses, so these are best viewed as low-return, guaranteed-liquidity products rather than wealth builders.
Related terms
- Sum AssuredSum assured is the guaranteed amount an insurer pays to the policyholder or nominee on the occurrence of the insured event.
- 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.
- Survival BenefitA survival benefit is a periodic payout made to the policyholder for surviving to specified milestones during a money-back or similar policy's term.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.