Securing the future of the family or loved ones against eventualities of life have been everyone’s top priority. For the same reason, term insurance has become popular in the past few years, but many people are still not aware of another similar policy called term plan with return of premium.
Usually, basic term insurance only provides benefits after the demise of the policyholder. In scenarios where the policyholder survives the term, they do not receive any survival benefits. This is where term insurance with return of premium plans come into the picture here.
These plans offer substantial coverage and tax-saving benefits (under Section 80C of the Income Tax Act 1951) throughout the policy tenure. Alongside, they also offer to return the total amount of annualized premiums paid towards the plan.
What is a Term Insurance Plan with Return of Premium?
In pure life insurance, you pay premiums for a certain period where the policy covers you for a specific term and conditions. If any unfortunate event occurs and you succumb to death within the policy term, your family can claim to sum assured of your term policy from the insurer. However, if you survive the policy term, neither you nor your family gets any benefits.
Term plan with return of premium offers protection in dual scenarios – when you survive the policy term as well as upon uncertain demise. Apart from providing primary benefits of term insurance, term plan with return of premium also offers policy maturity benefits upon your survival.
Under this policy, if you succumb to any critical illness, accident, or similar other reasons, your beneficiary will get the lump sum amount you chose while buying the policy. However, if you survive the term, you can get back all the premium paid throughout the policy tenure.
Features and Benefits of Term Plan with Return of Premium:
1. Sum Assured
In term insurance with return of premium, the sum assured is the life insurance cover you have opted while purchasing the policy. It is given to your family or beneficiary during contingencies. The sum assured for such plans is lower than pure term plans as you get back the premium paid over the years.
2. Policy Maturity or Survival Benefits
Term insurance with return of premium is the only policy offering survival or policy maturity benefits. Unlike traditional term plans where your beneficiary gets the benefits only upon your demise, this plan provides benefits when you survive the term period. Upon your survival, you can get back the entire premium paid over the years towards your term insurance with return of the premium policy.
3. Death Benefits
In the case of an eventuality, this plan offers similar benefits to your family or loved ones in the form of a lumpsum amount. Usually, the features and process vary for every insurance company where payment also depends upon the mode of lumpsum payment opted while buying the policy.
4. Surrender Benefits
Surrender benefits are offered when you decide to discontinue premium payment towards your policy during its term period. The surrender value of your term insurance with return of premium varies as per your payment options. It is usually higher for a single premium plan, where you must pay the entire premium at once while buying the policy. However, it also depends upon your insurer and their policy terms. You should check surrender benefits while buying the policy to avoid any hassles later.
Image Courtesy: Shutterstock
How Does Term Insurance with Return of Premium Benefit Works?
Let us understand the working of the policy with an example:
Suppose you are buying a term plan with return of premium option where you choose Rs20 lakhs as the lumpsum or sum assured. You take the cover for ten years for which you may have to pay Rs 2000 per year. If in case, any unfortunate event occurs and you don’t survive during the policy term, the total sum assured of Rs 20 lakhs will be given to your beneficiary. However, upon your survival of the policy term, you will get back the premium paid – Rs 20,000 (or 2000*10), which will be the survival or maturity benefit from the term plan.
Get the Best Term Plan with Return of Premium Policy
Every insurance company offering the plan has different terms. It is why you must do thorough research and only buy from reputable insurance companies. Term Plans with the return of premium benefit offer a variety of benefits along with other rider options such as waiver of premium, critical illness coverage, protection against accidental demise. Moreover, these plans provide comprehensive tax-saving benefits under Section 80C and 10(10D) of the Income Tax Act 1951.
