Year on year inflation is still close to 5%. Are rising prices making it hard for you to save for your family's future? If your answer is yes, here is a smart way to deal with inflation and secure a regular income --- money back policies. These offerings provide a 3-in-1 benefit system i.e life insurance cover, regular guaranteed payouts, and a lump sum maturity benefit. These multiple benefits can help you stay ahead of rising costs. With such policies taking a balanced approach between protection and liquidity, money back policies are suitable for risk-averse individuals wanting a steady second stream of money.
Value of Life Insurance
Historically rooted in community-based support systems, life insurance has become a crucial tool for securing financial stability in the face of unforeseen events. With a big chunk of population relying on a single breadwinner, life insurance is vital for various purposes. It can replace lost income, pay off loans, and ensure children's education and well-being.
In short, life insurance policies provide many benefits, the most-talked of them being financial protection to families. For instance, a term insurance plan with a coverage of ₹1 crore can cost as low as ₹800-900 per month for a 25-year-old individual. This makes it an accessible option for most.
On the other hand, if a policyholder wants to enjoy the financial fruits of their investment, a whole host of life insurance policies, including money-back policies, can be used to enjoy periodic income. This point highlights the often-ignored purpose of life insurance - securing you and your family's future.
At the end of the day, life insurance is a potent tool that utilises human life value (HLV) effectively. They are usually used to replace lost income. Additionally, they can also be used to accumulate wealth and create a legacy for beneficiaries. Plus, premiums qualify for tax deductions under Section 80C.
Types of Life Insurance Policies
Here is a look at various life insurance policies and their pros and cons.
Whole life insurance covers you for your entire life.
Endowment plans combine insurance with savings, providing a lump sum at maturity.
ULIPs combine insurance and investment with flexible fund options and potential for high returns.
Child plans offer financial security to protect your children’s future and tax benefits.
Money back policies offer life insurance, regular payouts, and a lump sum maturity benefit, thus making a serious effort to combat inflation and securing your future.
'Pay As You Live' Benefits
Did you know that money-back policies are often likened to a 'pay-as-you-live' scheme? Not just a life cover, but they also reward you with regular payouts at specific intervals throughout the policy term. It's like getting a bonus for staying healthy and financially secure.
Yes, money back policies combined life insurance with regular payouts. Unlike traditional policies that pay out only on death or maturity, money-back policies offer 'survival benefits' at intervals. For instance, a 20-year policy pays assured annual payouts while the policyholder is still alive. This 'money back' system can create a steady income stream. This income could be beneficial for long-term financial goals like child's education or marriage expenses.
Since money back policies offer both life cover and a regular income stream, they can be a viable option for risk-averse individuals seeking financial security and stability. As a potent life insurance financial planning weapon, money back policies fit well with most investors.
Role of Money Back Policies in Financial Planning
Financial planning is a 360-degree process of assessing your current financial situation, identifying short-term as well as long-term goals, and then creating a blueprint to achieve the same. A well-crafted financial plan empowers individuals to make informed decisions, build wealth, and secure their financial future.
With a money-back plan, you can fund various financial goals. You can even supplement your retirement income with these payouts. This consistent income stream enhances liquidity, making it easier to meet expenses as they arise.
Besides providing supplemental income and liquidity, money back policies can play several other significant roles in financial planning such as forced savings discipline, portfolio diversification, and as an option for loan collateral.
Recent Developments in Money Back Policy Space
In recent months, several insurance providers in India have launched new or revised money-back plans that provide enhanced flexibility. These policies focus on new features as outlined below.
Customisable premium terms: This feature allows policyholders to choose between limited premium payment options and regular premium payment options. Thus, one can align premium payment better with one's own financial goals.
Higher death benefit: This feature provides higher death benefits for added financial security to the family in case of the policyholder's death.
Enhanced surrender value: Some money back policies are offering a higher surrender value when the policyholder decides to stop the policy prematurely i.e. before maturity.
These recent updates showcase the ongoing trend towards more customer-centric and adaptable money back policies in India. In this way, insurers are aiming to better cater to the diverse needs of policyholders.