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Things You Should Know About Term Insurance With Return of Premium

Among Insurance Products, Term Insurance Is Well-known As An Affordable Option For Securing Life Coverage. It Is One Of The Most Straight Forward Financial Instruments That Can Offer A Substantial Cover To The Policyholder’s Family. The Policyholder Pays A Predetermined Premium Over The Policy Term

By : Avinash Prabhakar | Updated on: 07 Jun 2021, 03:41:24 PM

Representative Images (Photo Credit: File)


Among insurance products, term insurance iswell-known as an affordable option for securing life coverage. It is one of the most straight forward financial instruments that can offer a substantial cover to the policyholder’s family. The policyholder pays a predetermined premium over the policy term to put a financial shield over their family members against unpredictable circumstances.

It is undoubtedly a valuable product, but not many may be aware of a term plan with return of premium, which can extend the benefits for the policyholder.

What is Term Plan with Return of Premium?

Like a standard term plan, the term plan with return of premium provides life cover and a death benefit to the policyholder’s family. However, there is also the added advantage of maturity benefit associated with such a policy.

As the policyholder, you can select the required sum assured and policy term and pay the premiums accordingly. The key benefit of term insurance with return of premium is that the policyholder receives all the premiums paid over the policy period upon maturity of the plan.

For instance, let’s take the case of Mr. Sharma, a 30-year-old man who wishes to secure his life with a suitable insurance plan. He selects a term plan with return of premium and opts for a sum assured of Rs. 50 lakhs with a policy term of 40 years.

He pays an annual premium of Rs. 5,000 for his plan to keep the cover active. In the case of Mr. Sharma’s untimely demise within the policy tenure, the assigned nominee for his term plan with return of premium shall be entitled to the death benefit of Rs. 50 lakhs.

However, if Mr. Sharma survives the policy term of 40 years, he shall be eligible to receive a maturity benefit of Rs. 2,00,000 (5000 x 40) at the end of the policy period.

Here are some benefits of term plan with return of premium discussed in detail:

1. Survival Benefits

When you put your money in a plan for an extended period, the assurance of premium return is a relief for many policy buyers. Some policy buyers may not want to purchase a term plan because of the lack of maturity benefit. For such people, a term plan with return of premium can be an ideal alternative.

2. Death Benefit

You can protect your family by creating a financial shield with term plan with return of premium. In case of an eventuality, they can claim the policy to receive the death benefit. You can choose the sum assured, which is adequate for your family and pay regular premiums for the policy accordingly.

Make sure that the sum assured for a term plan with return of premium is sufficient to support your family in the future when you may not be around.

3. Availability of Riders

Something that makes a regular term insurance plan a desirable option for policyholders is the simplicity and opportunities to strengthen the coverage. The term insurance with return of premium can also provide similar advantages.

Policyholders can opt for relevant riders, which can enhance the insurance cover considerably. The rider availability may vary from insurer to insurer, but generally, you may find riders offering a waiver of premium, protection against accidental death or disability and critical illnesses.

You can choose the rider, which makes the most sense for you and optimize the benefits of the term insurance with return of premium per your preferences. Thus, enjoying comprehensive coverage from the insurance plan at affordable rates.

4. Tax Benefits

Policyholders can reduce their taxable income by investing in financial instruments such as term insurance with return of premium. Under Section 80C of the Income Tax Act, 1961, the premiums paid towards the term plan with return of premium are eligible for tax deduction up to Rs. 1.5 lakh annually. Additionally, the pay-outs from the policy are also tax exempted under Section 10 (10D) of the Income Tax Act.

Who Should Buy Term Plan with Return of Premium?

The financial profile of each individual is unique. Thus, choosing a suitable insurance plan is subject to personal factors. The life stage, when you buy term insurance with return of premium, your income source and health conditions play a vital role in the decision.

For example, if you are recently married and planning to start a family, your insurance plan may not look the same as someone who is nearing retirement. Moreover, it depends on the purpose of investing in an insurance plan. Some may be looking for a savings component, while others may only want the assurance of a life cover.

Therefore, making a sound term insurance comparison with other instruments can be helpful. You can map your financial requirements carefully for the next few years and see if term insurance with return of premium aligns with your goals.

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First Published : 07 Jun 2021, 03:41:24 PM