Term Insurance with Return of Premium: Everything you must know

A term plan is a pure protection plan amongst other life insurance products such as endowment-plans, money-back policies, whole life insurance, and so forth. Due to the primary objective of family protection, a term plan can offer death benefits to your family members in your absence. However, many of you might have felt that purchasing a term plan solely for the purpose of death benefits can be expensive. Hence, nearly 5% of the Indian population chose a term plan over other insurance policies, according to a report.

After the sale of term plan went down, many insurance companies reintroduced a regular term plan in the market again. Today, the new-age term insurance can be known as smart term plan that can offer death benefits as well as survival benefits. While the death benefits remain constant like a regular term plan, the insurance companies returned the whole premium amount as survival benefits.

Before you buy term insurance with return of premium, let’s understand its features for better clarity:

1. Coverage

The coverage can be an essential aspect of your term policy. Since a term policy can offer financial security to your loved ones, you should select an adequate coverage amount for them. However, if you choose insufficient coverage for your family initially, you can increase the coverage amount later. When you increase the coverage amount, you can ensure your family is adequately covered against all the unfortunate events such as critical illness, physical disability, critical illness, waiver of premium, and so on.

1. Premium

Whether it is a traditional life insurance or term life insurance, premiums are an inevitable part of every policy. Since premiums are provided in return for the coverage, you should pay it regularly. Under a term policy, you might have the liberty to decide to choose your premium payment frequency. As a policyholder, you can make the premium payment quarterly, monthly, half-yearly, or annually. If you fail to pay the premium, your insurer can provide you with a grace period of 30 days. However, the inability to make the premium payment within the grace period can lead to the lapse of the term policy.

1. Benefits

A new-age term policy can provide you with exclusive benefits to ensure your long-term safety. Here are the following benefits offered under a term policy with return of premium:

• Tax benefits

As a policyholder, term insurance tax benefits dictate a deduction up to Rs. 1,50,000 on your taxable income in accordance with Section 80C of the Income Tax Act, 1961.

• Riders

Many insurance companies can allow you to enhance the base term policy with additional riders. The most common riders that can be availed by insurance companies can be critical illness, physical disability, waiver of premium, and so on.

• Survival benefits

Under term life insurance, you can receive the survival benefits in the form of premium. Since it is a return of premium plan, the survival benefits can be 100% of the premium that you pay.

• Discontinuance charges

If you wish to discontinue your ULIP policy, your insurer can return your premium after specific deductions.

• Paid-up amount

When you are unable to make the premium payment, your term policy can automatically lapse. However, certain insurance companies might not cease the coverage but reduce your death payout value to match the total amount of premium paid so far.

Today, there are multiple term plan options in the market. Due to a host of available term plans in the market, you might find it difficult to select the right one for you. Hence, let’s understand how to choose the right term insurance with return of premium:

1. Opt for a sufficient coverage amount by considering the financial requirements of all the members of your family.
2. Look for an affordable premium amount as well as a term policy that can let you pay the premium amount based on your convenience.
3. Select an insurance company with a high claim settlement ratio. A claim settlement ratio can indicate the total number of claim that has been settled by an insurance company in a year. The higher the claim settlement ratio, the credible the insurance company.

To conclude, term insurance with return of premium can help you to lead a comfortable retirement period as well as meet your life goals after the flow of your income stops. However, see to it that you compare various plans in the market and calculate the premium beforehand using a term insurance calculator. After determining the premium and understanding which premium is suitable for you, make the final purchase of your term policy based on your financial goals.