LIC Policy: Want to buy Money-back plan to get big payback? Find out if you should do that

LIC Policy: The Life Insurance Corporation or LIC offers various insurance plans. LIC Money-back policy is one of them. The money-back policy by LIC is of two types in terms of maturity — 20 years maturity plan and 25-year maturity. According to tax and investment experts, the LIC Money-back Policy falls under the EEE (exempt-exempt-exempt) category means an investor has the luxury of getting income tax benefits on his or her LIC Policy premium payments, interest earned on it and the maturity amount - provided the net premium paid under the LIC policy is 10 per cent of the net sum assured. According to them, the LIC Money-back Policy is not an exception to it.

Speaking on the LIC Money-back Policy, Manikaran Singhal, a SEBI registered tax and investment expert said, "LIC Money-back Policy are of two types — 20 years maturity plan and 25 years maturity plan. In both plans, the investor gets 15 per cent to 20 per cent money-back of the sum assured after five years gap. In this LIC policy, one has the luxury of income tax benefit on the LIC policy premium payments, interest earned on it and the net maturity amount. However, this income tax benefit is available only when the net premium paid is one-tenth of the sum assured in the LIC Money-back Policy." He said that in LIC Money-back Policy, one would get the balance of the sum assured plus the bonus as maturity amount at the time of completion of LIC policy.

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Elaborating upon how does the LIC Money-back is different from other LIC policies Policy Jitendra Solanki, a SEBI registered tax and investment expert said, "In LIC Money-back Policy, an investor gets 15 per cent or 20 per cent (whichever mentioned in the LIC Policy) of the sum assured in the policy after a gap of every 5 years. Means, if the sum assured in a LIC Money-back policy is Rs 3 lakh. Then the LIC Money Back Policyholder will get 15 per cent or 20 per cent of Rs 3 lakh at the gap of five years during the period of LIC policy." 

Should you buy this kind of LIC Policy?
Solanki said that one should avoid this money-back offer because it affects one's maturity as the benefit of compounding goes down in LIC Money-back Policy. He said that it's better to go for a simple LIC plan without money-back because in that case one will get a higher bonuses and compounding benefits on one's interest earned in the LIC premium payments.