Money Back Policy Lic 20 Years Returns Calculator

This calculator helps you estimate the returns from a Life Insurance Corporation (LIC) money back policy over a 20-year period. Money back policies combine life insurance with savings, providing both protection and investment growth.

What is a Money Back Policy?

A money back policy is a type of life insurance that provides both protection and savings. It combines the benefits of term insurance with a savings component, where a portion of the premium is invested and grows over time.

LIC money back policies are popular in India and offer guaranteed returns along with life cover. The policyholder receives regular maturity benefits (partial withdrawals) during the policy term, with the full sum assured paid at maturity.

Key Features

Guaranteed returns on premiums paid
Life cover with death benefit
Partial withdrawals during the policy term
Tax benefits under Section 80C of the Income Tax Act

How to Calculate LIC Returns

The returns from a LIC money back policy can be calculated using the following formula:

Formula

Total Returns = (Sum Assured × Bonus Rate) + (Premium Paid × Guaranteed Addition Rate)

The bonus rate and guaranteed addition rate are typically provided by LIC for each policy. These rates are usually expressed as a percentage of the sum assured and premium paid, respectively.

Assumptions

Policy remains active for the full 20 years
No withdrawals during the policy term
No lapses or surrenders
Rates remain constant throughout the policy term

Example Calculation

Let's consider an example to understand how the returns are calculated:

Example Scenario

Sum Assured: ₹5,00,000
Bonus Rate: 5% per annum
Premium Paid: ₹10,000 per year
Guaranteed Addition Rate: 3% per annum
Policy Term: 20 years

Using the formula:

Total Returns = (₹5,00,000 × 5%) + (₹10,000 × 3%) × 20

Total Returns = ₹25,000 + ₹6,000 × 20 = ₹25,000 + ₹1,20,000 = ₹1,45,000

This means the policyholder would receive approximately ₹1,45,000 in returns over the 20-year period, in addition to the life cover benefits.

Key Factors to Consider

When evaluating a LIC money back policy, consider the following factors:

Sum Assured: The amount that will be paid to the nominee in case of the policyholder's death.
Premium Payment Term: The period during which premiums are paid.
Policy Term: The total duration of the policy.
Bonus Rates: The guaranteed returns on the sum assured.
Guaranteed Addition Rates: The returns on the premiums paid.
Tax Benefits: The tax advantages under Section 80C of the Income Tax Act.

Important Notes

Actual returns may vary based on the specific policy terms and conditions provided by LIC. It's important to review the policy document carefully before purchasing.

Frequently Asked Questions

What is the difference between a money back policy and an endowment policy?: A money back policy provides regular maturity benefits during the policy term, while an endowment policy provides a lump sum at the end of the term. Money back policies are more flexible in terms of withdrawals.
Can I withdraw money from a money back policy?: Yes, policyholders can withdraw a portion of the maturity benefits during the policy term, subject to the terms and conditions of the policy.
Are LIC money back policies tax-free?: The maturity benefits from a LIC money back policy are tax-free. However, partial withdrawals may be subject to tax depending on the holding period.
What happens if I die before the policy term ends?: If the policyholder dies before the policy term ends, the nominee receives the sum assured plus any accumulated bonuses and guaranteed additions.
Can I surrender a LIC money back policy?: Yes, policyholders can surrender a LIC money back policy, but surrendering before the end of the policy term may result in a partial refund and forfeiture of bonuses.