The emphasis on the importance of insurance in India is beyond explanation. Many people are readily buying insurance to secure themselves and their family members in difficult times. One such policy that many of you may have come across is the term insurance plan.
A term insurance plan is one of the basic life insurance products available in the market. The primary purpose of a term plan is to offer death benefits to the beneficiaries of the policy upon the death of the policyholder. The policy secures the financial future of your loved ones in your absence.
But what happens if you outlive the policy tenure? Well, term insurance does not offer maturity benefits. So, if you survive the policy term, no benefits are paid out by the insurer. Thus, to make the policy a little more flexible, insurers in India offer the ‘Return of Premium’ feature.
What Is A Return of Premium Features?
As explained earlier, term insurance plans ideally provide death benefits only. So, if you were to die an untimely death, the beneficiaries of the policy will receive the sum assured amount as the death benefit. But if you survive the policy term, neither you or the beneficiaries receive any payment.
However, if you have the return of premium cover purchased along with your term insurance plan, the insurer will repay the premiums paid on the policy as maturity benefits. Also, the term insurance tax benefits state that the amount received as death and maturity benefits is tax-free.
Consider the following example for a better understanding.
Let us assume that you have bought a term insurance plan with a return of premium cover. It offers coverage of INR 1 Crore with a payable premium of INR 25,000 every year. The policy term is 30 years. So, in case of your death, the beneficiaries will receive the sum assured amount as the death benefit. But if you outlive the policy tenure, the insurer will repay INR 7.5 lakh (paid as premiums) as the maturity benefit.
Should I Buy Term Insurance With the Return of Premium Cover?
Well, term insurance with the return of premium cover seems to be a worthy purchase. But there are still a few things that you should assess before making the purchase. It includes –
- We know that term insurance is quite an affordable insurance plan. But when you enhance its benefits with the return of premium cover, you will have to pay additional charges over and above the existing premium rate.
- The additional amount paid for other add-on covers will not be refunded under the return of premium cover. The return of premium cover only repays the basic premium amount charged on the term insurance plan.
- Do not consider buying term insurance with the return of premium cover solely for the maturity benefits. The primary intent of buying a term insurance plan should be to protect your loved ones financially in your absence.
Before you buy a term insurance plan, evaluate your financial condition and objectives properly. This will help you make a better insurance choice and help secure your and your family’s financial future.