A term insurance plan is a type of life insurance plan. It offers financial security through a lump sum amount as a death benefit to the family of the investor in case of the death of the policyholder. The obtained amount is beneficial for the family or loved ones to meet regular expenses such as living costs, housing, education, and others. The protection is offered up to a specific age, beyond which the policyholder gets survival benefits (applicable in certain new term insurance plans only).
Survival Benefits in Term Insurance Plan
The term insurance offers two types of survival benefits:
- Return of Premium Benefit
- Steady Income Benefit
Return of Premium Benefit
This benefit encompasses the return of the deposited premiums after the policy term. It is applicable if all the to-be-paid premiums have been regularly submitted throughout the tenure. It helps cover the upcoming years of an investor's life. Let’s understand this with an example.
A person buys a term life cover of ₹ 1 crore at the age of 30. Now till the age of 60, i.e., for the next 30 years, they are supposed to pay the premium of ₹ 1600 per month. This makes the total premiums ₹ 5,76,000. Hence, with the return of premium benefit, the person will get back the complete premium after the expiration of the policy. He/She will receive ₹ 5.76 lakhs on maturity.
Steady Income Benefit
This benefit also allows the policyholder to start receiving back their deposited premiums in a periodic manner. It begins at the maturity of the plan. The disbursed amount comprises the premiums paid till the premium paying period and any other additional benefits. Considering the previous example, the premium paying term is 60 years. Hence, the person will start receiving payment after that age. The payment will continue till the remaining policy tenure or the death of the policyholder.
