Money Back Policies in Life Insurance: Features and Benefits

Money Back Policies in Life Insurance: Features and Benefits

Money-back policies offer a unique blend of insurance protection and periodic returns. Unlike traditional plans that pay out only at the end of the term, these policies provide regular payouts during the policy tenure, making them ideal for those seeking liquidity along with life cover. They’re handy for meeting planned expenses like education, travel, or milestones.

This blog explores how money-back policies work and whether they align with your financial goals.

What Is Money Back Policy in Life Insurance?

A money-back policy is a type of endowment plan that provides a life insurance cover for a specified term and returns a percentage of the total sum assured at regular intervals during the policy term. This means the policyholder receives guaranteed periodic payments while remaining fully covered throughout the term.

Benefits of Money Back Policies in Retirement Planning

Here are the key advantages of this insurance product:

• Regular Income During Policy Term

  Money-back policies provide periodic payouts at fixed intervals, ensuring a steady income stream during your working years and helping you build a disciplined savings habit supporting long-term financial planning.

• Financial Cushion Post-Retirement

  The survival benefits and maturity payout serve as a financial buffer during retirement, offering additional support alongside your pension or savings plan to manage daily expenses or medical needs.

• Low-Risk Investment Option

  These policies offer guaranteed returns, making them ideal for risk-averse individuals who want stable, predictable income as part of their retirement portfolio.

• Insurance Protection with Returns

  In addition to providing life cover, money-back policies ensure your family is financially protected even as you receive benefits during the policy term, giving you the dual advantages of insurance and savings.

• Tax Benefits

  Premiums paid are eligible for tax deductions under Section 80C, and the returns received are generally tax-free under Section 10(10D), offering additional advantages when planning your retirement corpus.

• Helps Meet Milestone Goals

  Periodic payouts can be used to meet medium-term financial goals—like funding a child’s education or a home renovation—without disturbing your core retirement savings.

How Aviva India's Money Back Policy Works

Aviva India’s 7 Bima is a money-back life insurance policy that offers life cover and regular payouts. Policyholders pay premiums for a limited period—typically five years less than the total policy term. For example, with a 20-year policy, premiums are paid for only 15 years.

Every five years during the policy term, the plan pays out Survival Benefits, which are fixed at

Illustrative Payout Timeline (20-Year Policy):

• Year 5: Survival Benefit Payout (e.g., 10% of Sum Assured)
• Year 10: Survival Benefit Payout (e.g., 10% of Sum Assured)
• Year 15: Survival Benefit Payout (e.g., 10% of Sum Assured)
• Year 20 (Maturity): Final Payout (Remaining Sum Assured + Terminal Bonus, if any)
• Death during Term: Full Death Sum Assured is paid to the nominee, regardless of survival benefits already received.

Key Features of Aviva Nivesh Bima Plan

• Guaranteed Benefits

  This plan offers assured payouts, including survival benefits during the policy term and maturity and death benefits if all premiums are paid.

• Regular Money-Back Payouts

  Every five years, you receive 10% of the maturity sum assured as a survival benefit, providing regular liquidity during the policy term.

• Limited Premium Payment Term

  Premiums are paid for a term that is five years shorter than the overall policy term, making it easier to manage long-term payments.

• Comprehensive Life Cover

  Offers a death benefit equal to 11 times the annualized premium, ensuring strong financial support for your family in case of an eventuality.

• Optional Accidental Death Benefit Rider

  You can enhance protection with an accidental death benefit of up to ₹30 lakh, adding another layer of security.

• Tax Advantages

  Premiums qualify for deductions under Section 80C, and payouts are usually tax-free under Section 10(10D).

• Flexible Policy Terms

  Choose from 10, 15, or 20-year terms with corresponding shorter premium payment periods.

• Wide Entry Age Range

  Suitable for individuals between 13 and 60 years of age.

• Multiple Payment Modes

  Choose from annual, semi-annual, or monthly premium payments.

Why Choose Money Back Policy Over Other Life Insurance Plans?

Money back policies are particularly suited for individuals who:

• Need Regular Liquidity: The periodic payouts make them excellent for those who have recurring, planned expenses every few years, such as school fee lump sums or minor renovations.
• Prioritize Low-Risk and Guaranteed Returns: Unlike ULIPs (Unit Linked Insurance Plans) which are market-linked, money back plans offer guaranteed benefits, providing peace of mind.
• Want a Shorter Premium Payment Commitment: The limited premium payment term makes it possible to finish premium obligations early while coverage continues.

Comparison: Money Back Policy vs. Traditional Life Insurance

Feature	Money-Back Policy	Traditional Life Insurance
Payout Frequency	Periodic payouts during policy term + maturity benefit	Lump sum at the end of the policy term or on death
Liquidity	High – due to regular survival benefits	Low – payout only at maturity or death
Purpose	Combines savings with insurance	Primarily risk cover
Risk Profile	Low – offers guaranteed returns	Low – guaranteed but less flexible
Best For	Individuals needing periodic cash flow	Long-term financial protection
Premium Payment Term	Limited (shorter than policy term)	Usually equal to policy term
Tax Benefits	80C and 10(10D) tax advantages	80C and 10(10D) tax advantages
Policy Term Flexibility	Multiple options (10/15/20 years)	Usually long-term (10 years and above)
Bonus/Participation	Non-participating – no bonuses	May be participating (bonuses apply)
Market Linkage	Not linked to market performance	Not linked to market performance

Important Considerations

As an insurance professional, it is critical to present a balanced view.

• Understanding the Trade-offs: The sum assured for a money-back policy is typically higher than that of a pure term plan for the same premium, meaning the overall insurance cover is lower. This is the trade-off for receiving periodic returns.
• Risk of Surrender: If a policy is surrendered early, the policyholder may only receive a lower surrender value, resulting in a significant financial loss and loss of all future benefits.
• Inflation Risk: While returns are guaranteed, they may not fully keep pace with inflation over a long policy term. A balanced financial portfolio should include products with higher growth potential to offset this risk.

How to Choose the Right Money Back Policy for You

When selecting a plan, you must assess your personal financial situation:

• Assess Your Need for Liquidity:
• Compare Premium vs. Sum Assured:
• Check Premium Payment Term:
• Review Exclusions and Riders:

Tax Benefits of Money Back Policies in India

Money back policies offer two primary tax advantages under the Income Tax Act, 1961:

Section 80C: Premiums paid towards the policy are eligible for a deduction from your taxable income, up to the statutory limit of ₹1.5 lakh per financial year.

Section 10(10D): The proceeds/payouts—including the survival benefit, maturity benefit, and death benefit—are generally exempt from tax if the premium paid in any financial year does not exceed 10% of the actual sum assured.

Eligibility Criteria for Aviva's Money Back Policy

Criteria	Detail
Minimum Entry Age	13 years
Maximum Entry Age	60 years
Minimum Maturity Age	23 years
Maximum Maturity Age	75 years
Policy Term Options	10, 15, or 20 years
Premium Payment Term	5 years less than the chosen policy term
Premium Payment Modes	Annual, Semi-Annual, or Monthly
Minimum Sum Assured	₹1,00,000
Maximum Sum Assured	Subject to underwriting

This plan offers flexibility across age and payment modes, making it accessible to a broad range of individuals planning for financial security.

Also Read: How Life Insurance Can Grow Your Wealth

This comparison highlights how money back policies are more suited for those looking to blend protection with periodic savings.

Documents Required to Buy Aviva's Money Back Policy

• Proof of Identity: Aadhaar Card, PAN Card, Passport, Voter ID, or Driving License
• Proof of Address: Utility bills, Aadhaar, Passport, Voter ID, or rental agreements
• Proof of Income: Salary slips, bank statements, Form 16, or IT returns (may vary by sum assured)
• Age Proof: Birth certificate, school certificate, passport, or PAN Card, Recent Passport-sized Photographs
• Completed Proposal Form: Accurately filled and signed application form
• Medical Reports (if required): Based on age, sum assured, and medical history

These documents ensure smooth policy issuance and help verify eligibility and insurability.

Also Read: Life Insurance vs. Term Insurance

Money Back Policy Related FAQs

Can I surrender a money-back policy before the maturity date?

Yes, you can surrender a money-back policy after it has acquired a surrender value, typically after paying premiums for at least two to three years. However, surrendering early may result in lower payouts and the loss of future survival benefits and coverage.

Is a money-back policy suitable for long-term financial planning?

Yes, money-back policies are ideal for individuals seeking periodic returns and insurance protection. They help meet medium—to long-term goals like education or travel while ensuring financial security for your family through the life cover component.

What are the tax benefits of money-back plans?

Premiums paid towards money-back policies qualify for tax deductions under Section 80C, up to ₹1.5 lakh per annum. Additionally, payouts—including survival and maturity benefits—are generally tax-free under Section 10(10D), subject to specific conditions.

What are the eligibility criteria for buying a money-back policy?

Eligibility criteria typically include a minimum entry age of 13 and a maximum of 60. Policy terms range from 10 to 20 years with corresponding premium terms, and applicants must submit valid ID, address proof, and income documentation.

Which is the best money-back policy?

The best money-back policy depends on your financial goals, age, and income. Plans like Aviva Nivesh Bima offer a strong combination of periodic payouts, life cover, and tax benefits, making them a solid choice for balanced financial planning.

Can money back policy returns be guaranteed?

Yes, the Survival Benefits and the basic Sum Assured are guaranteed in a non-participating plan. Bonuses (if any, in a participating plan) are not guaranteed.

YMYL (Your Money or Your Life) Content Disclaimer:
Insurance is a subject matter of solicitation. The information provided in this document is for general knowledge and educational purposes only and does not constitute professional financial advice. All policy benefits, tax implications, and features are subject to the policy terms and conditions. The tax benefits are subject to changes in the prevailing tax laws. Customers are advised to refer to the policy documents and consult a financial advisor for a personalized assessment before making any investment decision.

AN May 65/25