Term insurance ensures that the life goals of policyholders do not derail, and the family is financially secure in their absence. It guarantees a pre-determined payout in case of a policy buyer’s death. However, if policy buyers survive the policy, they will not receive any financial protection, and the insurance plan will simply cease to exist.
In this regard, term insurance with a return of premium is an option one can consider. Keep reading to understand what precisely this insurance plan is and the benefits of opting for it.
What is a term insurance plan with return of premium?
Unlike a regular term plan, term insurance with a return of premium comes with an added benefit. It extends survival benefits to the policy buyers. So, if the insured survives the policy term, insurer will return the premium paid towards the policy. You will get the premium after a few necessary deductions of charges and taxes as per the terms and conditions under the policy. Even in case of the insured’s demise, his or her family will receive the sum insured.
Explore: Term insurance calculator
How does a term insurance with return of premium work?
Here is an example below to understand how it works to maximise financial coverage:
Suppose you have opted for a term plan of Rs. 30 lakh against tenure of 10 years. Your annual premium amount will be Rs. 3,000.
Now, in case of unfortunate death, your family will get the entire amount of Rs. 30 lakh.
In case of a return of premium plan, there is a benefit if you survive the entire policy term. In the example discussed above, as a survival benefit, you will receive a premium of Rs. 3,000 X 10 years.
This makes it a non-participating insurance plan. It extends either survival or death benefits to the insured or his or her family.
5 reasons why you should choose a term plan with return of premium option
A term insurance plan with a return of premium is an apt choice to secure your family and get premium returned. Though it comes against a higher premium than a regular plan, it offers the following benefits:
1. Guaranteed returns
Unlike other life insurance plans whose returns depend on the market conditions, term insurance with return of premium offers assured returns. However, policyholders may receive any profit from the insurer through their investment.
2. Death benefits
This insurance cover comes with a payback of the investment. This makes an ideal option for individuals who want to get a refund of premium at maturity, in both cases of survival or death. With a term plan with returns of premium, one can be rest assured of complete financial protection for one’s family.
3. Affordable option
If you require a term plan that guarantees financial coverage in your absence, term insurance with return of premium is an affordable option. Moreover, it is probably among the more cost-effective options for extending survival and death benefits.
4. Additional rider options
One of the biggest benefits of a term plan is if you can opt for an array of specific riders. Modify your term plan as per your requirements and exclusive to your policy. Moreover, reputed insurance companies provide add-on covers such as critical illness rider, personal accident, or disability riders. With these options, you can affirm complete financial coverage against illnesses.
5. Tax benefits
A term plan is beneficial as it ensures tax benefits under Section 80C of the Income Tax Act. You are eligible to receive a tax-deductible of up to Rs. 1.5 lakh against the premiums paid towards the policy. Furthermore, under Section 10 (10D) of the Income Tax Act, you will receive tax benefits on the payout from the insurance company.
However, these exemptions are subject to the terms and conditions and revised from time to time.
Who is eligible for a term plan with return of premium?
Following are the common eligibility criteria for getting a term plan with return of premium:
- Individuals aged 18 to 65 are generally eligible for a term insurance with return of premium.
- The applicant must meet the insurer’s health and income criteria.
- Non-smokers and those with a healthy lifestyle may receive better premium rates.
- Policyholders can choose a coverage period, typically ranging from 10 to 30 years.
Tips for choosing the most suitable term insurance with return of premium
Following are the tips to help you choose the most suitable term plan with return of premium to secure your financial future:
- Evaluate your financial goals and select a term insurance plan with return of premium that aligns with them.
- Compare premium costs across different insurers for the same coverage.
- Check the insurer's claim settlement ratio for reliability.
- Consider additional riders for enhanced coverage, such as critical illness or accidental death benefits.
As term insurance involves cash-value policies, one needs to look for the best-suited features and benefits at their convenience. Therefore, individuals must thoroughly compare the options available, ensuring impressive returns and multiple riders against cost-effective premiums.
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