If you are seriously searching for Best Money Back Policy, this article is for you. If you have already invested in a Money Back Plan, be it from LIC or HDFC or SBI Life for 5 Years or 25 Years, you are stuck. Believe me you, it is the worst instrument for investment. Even saving accounts are better. Before going into details, here are the reasons- why you should not invest in it?
- Low Returns
- Low Sum assured
- High premium
- Low Surrender Value
- No Flexibility
- Zero Benefits
Aren’t the above mentioned reasons enough, let us see with an example
You will get money on the 5th Year, 10th Year, 15th Year etc! This is the usual sales pitch of an Insurance Agent when he is selling this Policy. But what is the reality? Is Money Back Policy a better Investment option?
Certainly not. These Policies are the worst investment. This is because of the very high Premium of these Policies.
If you are aged 30, you can buy an Endowment Policy of LIC for 20 years for Rs. 5 Lakhs, by paying an annual premium of Rs. 23,809. But, if you are buying a 20-year Money Back Policy of LIC, your annual premium will be Rs. 37,259. The increase in Premium for Money Back Policy is around 56%!
What are the benefits under the Money Back Policy?
As the name indicates, you will get periodical amount in this Policy. These are called Survival benefits. In the 20-year Money Back Policy of LIC, you will get 20% of the sum assured at the end of 5th Year, 10th Year and 15th Year. At the end of 20th Year, you will get 40% of the Sum Assured and Bonus.
In the above example, you will get
- Rs. 1 Lakh as Survival benefit at the end of 5th Year
- Another Rs. 1 Lakh at the end of 10th Year and another
- Rs. 1 Lakh at the end of 15th Year.
- At the end of 20th Year, you will get Rs. 2 Lakhs and Bonus for the 20 years.
As per the current Bonus rate of LIC, you can expect around Rs. 3.9 Lakhs as Bonus.
What happens in case of death during these 20 years?
In case of death anytime during these 20 years, Nominee will get the full Sum assured of Rs. 5 Lakhs and the Bonus till date. For example, if there is death in the 12th Year, the Nominee will get the Sum Insured and Bonus for 12 years. The amount already paid as Survival benefits will not reduce the death claim amount. This is the attraction in Money Back Policies.
You can reinvest the Survival benefits and earn higher returns
This sales pitch is the most attractive, while selling Money Back Plans. But the reality is different. When you are getting the Survival benefit of Rs. 1 Lakh after 5 years, there will be some other priority for you and in all likelihood the amount will be spent on such priorities. Reinvestment seldom happens.
Best Money Back Policy for 5/10/20/25 Years
There are various Money Back plans offered by Insurance companies, but none of it is even close to best. Also, the tenure of the Money Back Policy ranges from 10-25 years.
and you start getting money after 4 or 5 years.
Below are some names of the Money Back plans
LIC Money Back Policy for 20 Years (My first investment was in this policy as one of my uncle was a LIC Agent ). Surrendered the policy after 5 years and lost 1 Lacs.
Bajaj Allianz Cash Insurance (where they insure their cash, not yours )
HDFC Life – Super Income Plan (where everything is super except the income )
SBI Life – Smart Money Back Gold ( where they are smart and make gold from your money )
LIC`s New Children Money Back Policy ( where they secure the future of their children, not yours )
Reliance Super Money Back Plan ( where the returns are super for the insurance company and no need to tell, how they earn super returns from your money)
Aegon Life Regular Money Back Plan( where the agents earns regular commission from your money)
Canara HSBC Smart Stage Money Back Plan( Where they smartly make money according to their life stage )
BSLI Bachat Money Back Plan( Where they do bachat from your money )
My only advice and review is
- Never mix insurance with investments.
- Even if you are mixing it, Money Back Policy is a big NO NO.
LIC Money Back Policy Table
If you still not convinced, here is the link to check LIC Money Back Policy table.
Is it a good investment for you?
No, such policies neither offer decent returns nor sufficient risk cover for the policy holders. There is no flexibility in such policies. Once you join the Policy, you have to pay the premium for the full term whether you like it or not. If you want to close the Policy, you will get only the Surrender value. As a result, you will lose the premium amount.
Money Back Policies – the worst investment option
In the above example, you have seen that you have to pay a premium of Rs. 7,45,180 in 20 years for a Rs. 5 Lakh policy!
Life Insurance policies are not good for investment. Also Money Back Policies are the worst investment options in the market. As bonus rates are coming down year after year and this will make policies unattractive. LIC has higher bonus rates than private companies.
In Conclusion, It is better to avoid Money Back Policy for investments because of poor returns and low flexibility.
So what is your view on Money Back Policy? Are you still thinking of investing in it?
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