READ THE FINEPRINT of Money Back Policies

Before buying a money back plan, insurance advisors recommend that you should carefully check out the actual amount allocated towards the premium, how much of it is going to be accumulated and how much is the insurance company’s charges.

The most crucial aspect, they believe , is reading the terms and conditions thoroughly and understanding each clause well.

“Also, you should make sure that the periodic payouts are sound enough to meet your anticipated needs. It is also beneficial to analyse the past performance in terms of declared bonuses. Though the past is not necessarily an indication of future performance, it gives a fair idea of the insurance company’s commitment to its policy holders,” says Sanjay Tripathy, head, marketing, HDFC Standard Life Insurance.

HDFC Standard Life’s money back policy provides additional optional benefits such as critical illness benefits, additional term benefit, accidental death benefit and waiver of premium benefit.

Singh points out that an enquiry on the minimum number of years for which the premium is to be paid to keep the policy alive, is also a mustcheck .

“The tax benefits on the survival benefits may not be available under certain circumstances for example where the premium in any year exceeds 20% of the sum assured. You should watch out for these pitfalls since tax benefits are key to the attractiveness of this policy,” he says.

THE FLIPSIDE One of the primary disadvantages, insurance advisors feel, with money back policies is its low rate of return, when compared to market-linked insurance-cum-investment products. Also, while on the one hand, payout intervals are fixed and helpful for crucial lifestage planning, on the other, you don’t have the flexibility to increase or decrease premiums and have a choice of sum assured to suit growing incomes and lifestyle

You don’t have the freedom to change the payout intervals. In case of surrender as well, it offers low paid-up value.

For those who like to ascertain the charges of their investment products, it may not be the right choice as it is not disclosed to the policyholder,” says Saxena. MONEY, MONEY PROTECTED SAVINGS: As the premiums paid are not linked to the capital market Guaranteed returns. LIQUIDITY: Meet intermittent liquidity requirements at important stages of lifestage.

LIFE INSURANCE: In case of an eventuality to the insured person.