Picture this: You’re 35 years old with a 5-year-old child. College admission is 13 years away, marriage might be 20 years down the line, and you want to save systematically while keeping your family protected. But here’s the problem – locking all your money for 20 years feels risky. What if you need funds for school fees at year 10? Or a house down payment at year 15?
This is exactly the problem LIC New Money Back Plan 20 Years solves. Instead of making you wait two decades for your money, it gives you back chunks of it at years 5, 10, and 15, while keeping you insured throughout. Think of it as getting your cake and eating it too – protection plus periodic cash flow.
But is it actually worth it? Let’s dig into the details, crunch some numbers, and figure out if this plan deserves a spot in your financial portfolio.
What Exactly Is LIC New Money Back Plan 20 Years?
LIC New Money Back Plan 20 Years (Plan No. 720) is what insurance nerds call a “participating money-back plan.” Let me translate that into English:
Money-back plan: You get portions of your sum assured returned to you at fixed intervals (years 5, 10, 15) while the policy continues. It’s not your premiums coming back – it’s actual benefits you’re entitled to.
Participating plan: You share in LIC’s profits through bonuses. When LIC’s investments do well, they declare bonuses that get added to your policy, boosting your final payout.
20-year term: The policy runs for 20 years, but here’s the sweet part – you only pay premiums for 15 years. The last 5 years are premium-free while you still get all benefits.
The Timeline: How Your Money Flows
Let’s say you start this plan today with ₹10 lakh sum assured:
Year 0-15: You pay annual premiums (approximately ₹60,000-75,000 depending on your age, gender, and health profile)
Year 5: You receive ₹2 lakhs (20% of ₹10L) – maybe your child’s school needs a tech upgrade or family needs a vacation
Year 10: Another ₹2 lakhs comes in – could fund higher secondary education expenses or home renovation
Year 15: Yet another ₹2 lakhs – perhaps coaching classes for competitive exams or initial college admission fees
Year 15 onwards: You stop paying premiums! But the policy continues.
Year 20: You receive ₹4 lakhs (40% of ₹10L) PLUS all accumulated bonuses – this is when the big payout happens, perfect timing for college graduation or marriage expenses
Throughout all 20 years, you’re covered for life insurance worth more than ₹10 lakhs (higher of 125% of sum assured or 7 times annual premium, whichever is higher, plus accumulated bonuses).
Who Can Buy This Plan?
Minimum entry age: 13 years (yes, you can start this for a teenager) Maximum entry age: 50 years Maximum maturity age: 70 years Minimum sum assured: ₹2,00,000 (in multiples of ₹25,000; though realistically, ₹5-10 lakhs makes more sense for meaningful benefits) Maximum sum assured: No fixed limit, subject to underwriting
Premium payment modes: You can pay yearly, half-yearly, quarterly, or monthly through auto-debit
Here’s a practical reality check: If you’re 50 years old starting this plan, you’ll mature at 70. That’s perfect for retirement planning – getting money at 55, 60, 65, and finally 70 to supplement your retirement income.
If you’re 30, you’ll mature at 50 – aligning beautifully with children’s higher education and your own pre-retirement phase.
The Money-Back Structure: Show Me the Numbers
Let me break down exactly what you get with a ₹10 lakh sum assured policy:
Survival Benefits (Money-Back Payouts)
End of Year 5: ₹2,00,000 (20% of sum assured) End of Year 10: ₹2,00,000 (20% of sum assured) End of Year 15: ₹2,00,000 (20% of sum assured)
Total money back during policy term: ₹6,00,000
These amounts are guaranteed as per the current product terms – as long as your policy is in force (premiums paid), you WILL receive these survival benefit percentages. No market conditions, no performance requirements.
Maturity Benefit (End of Year 20)
Guaranteed portion: ₹4,00,000 (40% of sum assured) Plus: All simple reversionary bonuses accumulated over 20 years Plus: Final additional bonus (if LIC declares one)
Total maturity can be in the ₹10-12 lakh range in some illustration scenarios, depending entirely on future bonus declarations; this is only indicative, not guaranteed.
Understanding Bonuses: The Real Return Booster
Here’s where the “participating” part kicks in. LIC declares two types of bonuses:
Simple Reversionary Bonuses (declared annually): As an illustrative example: if LIC were to declare ₹50 per ₹1,000 of sum assured as bonus in a particular year, On ₹10 lakh sum assured = ₹50,000 bonus added that year Over 20 years at similar rates = approximately ₹10 lakhs in total bonuses
This is purely illustrative based on past bonus patterns – actual bonus declarations vary year to year based on LIC’s investment performance and may be higher or lower.
Final Additional Bonus (declared at maturity): One-time bonus at the end; the actual amount, if declared, depends entirely on LIC’s investment performance and bonus policy over the 20-year period.
Important: Bonuses are NOT guaranteed in advance. They depend on LIC’s investment returns. However, once declared and added to your policy, they’re yours – locked in forever.
What If Something Happens to You? (Death Benefit)
Throughout the 20-year term, if you pass away, your family receives:
Sum Assured on Death: Higher of
- 125% of Basic Sum Assured, or
- 7 times the annualized premium,
and will not be less than 105% of total premiums paid (excluding taxes, extra premiums, and rider premiums)
Plus: All bonuses accumulated till death Plus: Final additional bonus (if applicable)
Exact multiples are as per the latest LIC sales brochure; always refer to the current document for confirmation.
Critical detail: The survival benefits already paid are NOT deducted from death benefit. So even if your family already received ₹2 lakhs at year 5 and ₹2 lakhs at year 10, and you die in year 12, they still get the full death benefit. This is huge.
Example: You die in year 12 after receiving ₹4 lakhs in survival benefits:
- Death benefit: ₹12.5 lakhs (125% of ₹10L)
- Plus bonuses: ~₹6 lakhs
- Total to family: ~₹18.5 lakhs
- Money already received: ₹4 lakhs
- Total family benefit: ₹22.5+ lakhs from a ₹10 lakh policy
That’s meaningful protection.
Real Returns: What Can You Actually Expect?
Let’s get realistic about numbers. Insurance agents love showing rosy illustrations. Here’s the honest picture:
Assuming: You’re 35 years old, ₹10 lakh sum assured, annual premium approximately ₹60,000-75,000 (varies by gender, health, and payment mode) for 15 years
Total premiums paid: Approximately ₹9-11.25 lakhs over 15 years (based on the ₹60,000-75,000 annual premium range; exact amount depends on your specific quote)
What you get back:
- Year 5: ₹2,00,000
- Year 10: ₹2,00,000
- Year 15: ₹2,00,000
- Year 20: ₹4,00,000 + bonuses (let’s say ₹8,00,000) = ₹12,00,000
Total received: ₹18,00,000 (₹6L survival + ₹12L maturity)
Approximate IRR: Around 5-6% (based on assumed bonus levels similar to past patterns; actual IRR will depend on future bonus rates and your exact age and premium profile)
Is this good?
Compared to FDs: FDs give 6-7% but fully taxable. After tax, ~4.5-5%. This plan gives tax-free maturity under Section 10(10D), so effective 5-6% post-tax is competitive.
Compared to mutual funds: Equity funds can give 12-15%, but with volatility and market risk. This gives certainty with zero market risk.
Compared to PPF: PPF gives 7.1% tax-free, which is better. But PPF has ₹1.5L annual limit and no life cover.
The real value: It’s not just about IRR. You’re getting:
- Life cover throughout (worth something)
- Periodic liquidity (worth a lot if you need it)
- Forced savings discipline (worth its weight in gold)
- Tax benefits on premiums (Section 80C) and maturity (10(10D))
For many families, this complete package justifies the returns.
Tax Benefits: The Cherry on Top
On Premiums (Section 80C): Premiums qualify for deduction up to ₹1.5 lakhs per year, reducing your taxable income.
If you’re in 30% tax bracket: Annual premium of ₹60,000-75,000 saves you ₹18,000-22,500 in taxes annually.
On Survival Benefits and Maturity (Section 10(10D)): Typically tax-free, subject to conditions:
- Premium should not exceed 10% of sum assured (for policies issued after April 1, 2012)
- For high-premium traditional policies issued after April 1, 2023, aggregate annual premium across such policies should not exceed ₹5 lakhs (as per recent amendments to Section 10(10D))
For a ₹10 lakh policy with ₹60,000-75,000 annual premium (6-7.5% of sum assured), you’re well within the 10% limit, so maturity should be tax-free under Section 10(10D).
Important: Tax laws change. Verify current provisions with your CA before assuming tax-free status.
Who Should Actually Buy This Plan?
Perfect For:
Parents planning for children’s education/marriage The money-back timings (years 5, 10, 15, 20) align beautifully with a child’s educational journey from primary school to college graduation to marriage.
Conservative savers who need periodic liquidity You don’t want all money locked for 20 years. The survival benefits give you breathing room.
Salaried individuals wanting forced discipline Annual premium payment forces you to save. You can’t “forget” or “spend it on something else.”
Those valuing LIC’s brand and safety You trust LIC’s 65+ year track record and want guaranteed returns with bonus upside, not market volatility.
People in old tax regime You benefit from Section 80C deduction on premiums. New tax regime users don’t get this benefit.
Not Ideal For:
Aggressive investors seeking high returns If you want 12-15% returns, equity mutual funds are better. This gives 5-6%.
People needing full liquidity Early surrender (before 2-3 years) gives very poor surrender value. Don’t buy this if you might need money soon.
Those already maxed out on 80C If EPF + PPF + home loan principal already uses up your ₹1.5L Section 80C limit, the tax benefit is wasted.
Young professionals with unstable income If you’re not sure you can pay premiums for 15 years consistently, don’t start. Lapsing is expensive.
The Pros and Cons: Let’s Be Honest
Advantages
✓ Guaranteed survival benefits – Money at years 5, 10, 15 is certain (if policy is in force)
✓ Life cover throughout – Your family is protected for 20 years
✓ Limited premium payment – Pay for 15 years, get benefits for 20 years
✓ Bonus participation – Share in LIC’s profits, boosting returns
✓ Tax efficiency – 80C deduction + tax-free maturity (subject to conditions)
✓ Loan facility – Can borrow against policy after a few years without surrendering
✓ Death benefit doesn’t reduce – Survival benefits paid don’t decrease death claim
✓ Simple and transparent – No market tracking, no NAV watching, no rebalancing
Disadvantages
✗ Lower returns than equity – 5-6% vs potential 12-15% in equity funds
✗ Bonuses not guaranteed – Final amount depends on LIC’s declarations
✗ Inflation risk – ₹2 lakhs in year 20 will buy less than ₹2 lakhs today
✗ Liquidity constraints – Can’t exit easily without losing money in early years
✗ No flexibility – Can’t increase/decrease sum assured mid-term
✗ Opportunity cost – Money locked that could be invested elsewhere for potentially higher returns
Common Questions People Ask
“Can I get higher returns than 5-6%?”
The guaranteed portion (sum assured) is fixed. Returns improvement comes only from higher bonus declarations, which you can’t control. Historically, LIC’s bonus rates have been decent but not spectacular.
“What if I can’t pay premium in year 8?”
Policy gets a grace period (30-90 days depending on mode). If still not paid, policy lapses. You can revive it within 5 years by paying pending premiums with interest. But it’s messy – try to avoid.
“Should I take ₹5 lakh or ₹10 lakh sum assured?”
Think about your actual needs. If child’s education goal is ₹20 lakhs over 20 years, and you expect this plan to fund part of it, ₹10 lakh makes more sense than ₹5 lakh. But match it to your premium-paying capacity – don’t overstretch.
“Can I add riders for extra protection?”
Yes! You can add:
- Accidental Death and Disability Benefit Rider (extra payout if death/disability due to accident)
- Accident Benefit Rider
- New Term Assurance Rider (additional pure term cover)
- Health riders (subject to availability and eligibility)
These cost extra but strengthen protection. Especially consider accidental death rider if you travel frequently or have risky occupation.
“Is this better than LIC’s 25-year money back plan?”
Depends on your goals:
- 20-year plan: Better if goals are 15-20 years away (child’s undergraduate)
- 25-year plan: Better for longer goals (child’s postgraduate + marriage)
The 25-year variant spreads premiums over 19 years and gives money back at 5, 10, 15, 20, 25. Choose based on when you actually need the money.
How Does This Compare with Alternatives?
vs. Pure Term Insurance + Mutual Fund SIP
Term Insurance: ₹1 crore cover costs ~₹12,000/year Mutual Fund SIP: ₹53,000/year (balance from your ₹65K budget)
At year 20:
- Term insurance: No maturity, only death cover
- Mutual Fund SIP at 12% p.a.: ~₹45 lakhs accumulated
Winner: Term + SIP gives higher corpus
But: Money-back plan gives you periodic liquidity (₹2L at year 5, 10, 15) which you might need and might not maintain discipline to not withdraw from mutual funds.
vs. PPF
PPF: ₹1.5L per year limit, 7.1% returns, tax-free, 15-year lock-in
Winner: PPF gives better returns
But: PPF has contribution limit, no life cover, can’t exceed ₹1.5L/year. Money-back plan has no upper limit on sum assured and includes life cover.
vs. Bank FDs
FD: 6-7% returns, fully taxable, easy liquidity
After-tax FD returns (30% bracket): ~4.5-5%
Winner: Money-back plan matches/beats FD on post-tax returns and adds life cover
My Honest Verdict: Should You Buy It?
Here’s my take: LIC New Money Back Plan 20 Years isn’t a wealth creation machine. It’s a wealth preservation + protection + periodic liquidity tool.
Buy it if:
- You’re in your 30s-40s with young children and specific 20-year goals
- You value safety and LIC’s brand over high returns
- You need periodic money at years 5, 10, 15 for real expenses
- You’re in the old tax regime and can use 80C benefit
- You want life cover and savings in one simple product
Skip it if:
- You’re chasing 12-15% returns (buy equity funds instead)
- You already have adequate term insurance and want pure investment (buy PPF or mutual funds)
- You might need money in next 3-5 years (liquidity is poor early on)
- You’re in new tax regime (80C benefit doesn’t apply)
The sweet spot: Use this as 20-30% of your overall portfolio, not 100%. Combine with term insurance (for adequate cover), PPF/EPF (for stable returns), and equity mutual funds (for growth). Diversification wins.
Final Checklist Before You Buy
Before signing on the dotted line:
☐ Get personalized illustration from LIC agent showing exact premiums and projected maturity for your age
☐ Confirm current product specifications – Verify minimum sum assured multiples (currently ₹25,000) and death benefit formula from the latest official brochure
☐ Calculate actual IRR using financial calculator – don’t trust agent’s verbal claims
☐ Verify tax eligibility – Check if premium-to-sum-assured ratio qualifies for 10(10D)
☐ Ensure premium affordability – Can you pay this amount for 15 years without stress?
☐ Read policy document – Especially exclusions, bonus calculation methodology, surrender value schedule
☐ Compare with 25-year variant – Which timeline suits your goals better?
☐ Add appropriate riders – Don’t skip accidental death benefit if it’s relevant
☐ Check existing 80C utilization – Are you already maxing out deduction elsewhere?
Important Disclaimer: This article explains LIC New Money Back Plan 20 Years based on Plan No. 720 (UIN: 512N280V03) as available in 2026. Product features, bonus rates, premium amounts, and tax treatment can change through LIC circulars and tax amendments. Older versions like Table 820/920 have been withdrawn and are not covered here.
Actual premiums vary based on age, gender, health, and other underwriting factors. Bonus declarations are not guaranteed and depend on LIC’s future investment performance. The examples and calculations in this article are illustrative only and should not be considered as guaranteed returns.
For latest features, exact premium quotes, current bonus rates, and eligibility criteria, always refer to LIC’s official website (licindia.in), use official calculators, and consult a licensed LIC advisor before making any purchase decision. This article is for general educational purposes and should not be considered as personalized financial, investment, or tax advice.
Tax benefits under Section 80C and Section 10(10D) are subject to conditions and prevailing Income Tax Act provisions. Consult a qualified tax advisor for advice specific to your situation.
