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Should I exit from the Money back insurance plan?

On surrender of your money back insurance plan, the surrender value will be added to your annual income and you will be taxed as per your applicable income tax slab

I joined the Reliance Super Money Back Plan recently on the assurance from the agent that the monthly payouts ,the survival benefit, loyalty benefit etc. are 100 percent tax free and that a substantial amount of bonus will be paid at the end of the policy term. However, the policy document does not mention any of these facts and no clear explanation is provided by the agent/insurer. Therefore, I request you to clarify on the tax liabilities of the said plan. Meanwhile after going through the Value Research online articles, I realise that I have been taken for a ride. Should I continue paying the remaining four annual premiums or suffer the loss of the premium already paid, surrender the plan and invest in mutual fund schemes?
- Narayankutty

Reliance Super Money Back plan is an insurance-cum-investment product. These hybrid products are often mis-sold by highlighting the tax deductions and tax free returns. However, the truth behind such mis-selling is often the attractive commission that the agents earn on these products.

Money back policies are similar to endowment insurance plans where the policy provides for partial survival benefits during the term of the policy. These type of products are expensive, they mostly fail to offer adequate insurance cover and they don't offer good returns. The ideal solution for you would be to exit this policy right away. Even though on surrendering the plan you will incur a loss, it will help you to stop a bad investment and earn better returns in a pure investment product.

The surrender value will be the higher of the guaranteed surrender value or special surrender value depending on the term of the policy and the premiums paid. You may contact your insurer to get detailed information on the surrender value. The surrender value will be added to your annual income and will be taxed as per your applicable income tax slab.

We don't encourage mixing insurance and investment needs.If you are looking for investments with 80C tax exemption, then you can choose Equity Linked Savings Scheme (ELSS) for your long term goals which give you good returns. Also for insurance cover, you must only go for pure term insurance.

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