While deciding which term plan to buy, it is necessary to understand your future needs. You need to understand what your family members may require the money for in the future. The major purpose of any term insurance plan is to secure your family’s financial future. Families that depend on a sole breadwinner need a security plan that can ensure comfort and financial security in the future in case of the demise of the breadwinner of the family. Though, with the usual term insurance plans, the rule that the policyholder will get zero in return if they outlive the policy makes it risky. Term insurance plan with return of premium means all the premiums the policyholder has paid will be paid back to them in case they outlive the policy term.
Term Insurance Plans with Return of Premium - Pros and Cons
A term plan with a return of premium has some pros and some cons as well. However, the plan may fulfill your needs and address the future wants of your family members. Weigh your decisions after understanding the pros and cons of a term plan with return of premium:
|Advantages of Term Plan with Return of Premium||Disadvantages of Term Plan with Return of Premium|
|Pays back all the premiums if the policyholder survives the policy term.||Most returns of premium plans require a higher premium payment.|
|Term plan with return of premium is covered under Section 80C and 10(10D) of Income Tax Act, 1961. According to the section, the term plan is viable for tax benefits.||Once the policy matures and the policyholder claims the return benefits that they must get under the plan, they will find that there is no interest added to the benefits.|
|In case, the policyholder passes away during the policy term, the death benefit is paid to the nominee(s).||The insured must survive to get the return on premiums. The premiums are not paid back if the policyholder passes away during the term.|
|Premium amount remains stable throughout the policy term and hence the insured can arrange for the payments accordingly.||The policy must stay in force to get the benefits. If the policy lapses, no benefit will be paid to the nominee(s).|
Six Features of Term Insurance Plans with Return of Premium
Listed below are the essential features of the term plan with return of premium that makes it an ideal option for people looking to get complete protection with a term plan:
1. Maturity Age
When you sign up for a normal term policy, you will notice that most banks and insurance providers offer a maturity age of 70 years or around it. In such cases, the policyholder cannot get any time to utilize the money that they saved up over the years. In case of return of premium term plan, you can choose to sign up for a 5 to 30 years long term or any other duration of their choice as the returns are guaranteed even if the policyholder is living upon maturity.
2. Payment Options
There are a plethora of payment options under term plan with return of premium. Based on your needs and situation, you can choose a suitable payment option. These options include monthly, quarterly, half-yearly, and yearly payments. The insured can also choose to pay a lump-sum amount for the term plan.
3. Death Benefit
The term insurance plans with return of premium also ensure a significant amount signed under death benefit. This is provided along with the returns in case the policyholder dies before the maturity age of the term plan.
4. Survival Benefit
This is the feature that makes term plans with a return of premium different from all other term plans. Even if the insured survives after the maturity of the plan, they can claim the complete returns of the insurance payments that have been paid by them over the years.
5. Surrender Value
The surrender value is applicable when the person insured under the policy chooses to surrender the plan mid-way its term. The best benefit you can get in such cases is if you choose to pay the premium of the plan in lump-sum. If you pay a premium at regular intervals, then the surrender value will be equal to the total of the premiums paid by you up to the time of surrender.
Learn should you surrender term insurance plan when you have no liabilities.
6. Rider Benefit
You can choose to add on various riders along with the original term insurance plan with a return of premium for better security. These riders range from critical illness riders, accidental death riders, etc. Now that you have understood the various features of the term plan with return of premium, you must have received an idea regarding how it carries more benefits than usual term plans.
The term plan with return of premium may be the perfect choice for some, while for others, it may fail to provide the terms and conditions that they need. Thus, the final decision lies with the varied needs and requirements of different people.
If you need a short or long-term savings plan, then such a policy is the perfect choice for you as it assures returns. You should consider your present financial situation and future needs while buying a term plan that suits you the best. You can also choose various riders that are available under the term plan with a return of premium of added coverage.