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Term Insurance With Return Of Premium

Securing your loved ones from unforeseen events is our top priority. With a term insurance plan that offers return of premium, you will receive the refund of the premium at maturity.

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Term Insurance With Return Of Premium

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What is a term plan with a return of premium option?

Term insurance plans are often overlooked in favor of endowment plans or other complex life covers. However, given that they’re pure protection plans with the primary objective of offering you a sizable life cover at incredibly affordable rates, term insurance policies are one of the best investment options available for beginners as well as for seasoned investors. In the conventional model, term life insurance plans only offer death benefits. You pay a premium that entirely goes towards contributing to your life cover, and in case you pass away before the plan matures, your beneficiaries receive the death benefits as specified by the plan.

Over time, however, term insurance policies have evolved to include a variety of other enhanced coverage options. Some of these include accidental death benefits, wherein your beneficiaries receive an additional payout in case you die in an accident, and accidental disability cover, wherein the insurer pays you a lump sum amount in case you suffer from permanent disabilities due to an accident. There are also other options like critical illness covers, where the insurance company pays out a lump sum amount or periodic payments if you’re diagnosed with a critical illness.

Among these additional benefits offered by contemporary term insurance policies is the return of premium feature. You can make the choice to subscribe to a term plan with the return of premium option at the time purchase.

Term Insurance Plans

Canara HSBC Oriental Bank of Commerce Life insurance offers online Term insurance plans which helps to secure your family financially in your absence.

iSelect Star Term Plan

iSelect Star Term Plan

Whole life cover option available

Increase your life cover with changing life stages

Return of premium & in-built protection options

Multiple premium payment options

Avail tax benefits on premiums paid as per tax laws

POS

POS - Easy Bima Plan

Double life cover in case of accidental death

Return of premium on maturity

Premium payment term options

Tax benefits

How does the Return of Premium option work?

Before you discover why this feature is beneficial, it’s important to first get to the basics and address what the return of premium option essentially is. A term plan with the return of premium option is a life insurance policy that comes with the added advantage of having your premium returned to you after the policy has matured.

This is different from a regular term plan, where the premium you pay is not refunded by the insurer once the policy has matured. In a conventional term insurance policy, you pay the premium due throughout the course of the plan. In case your demise occurs before the plan’s maturity date, the insurer pays out death benefits to your nominees. However, if you survive the policy’s maturity date, you do not generally receive any payouts.

Here’s where a term plan with the return of premium works differently. In this scheme, once your policy has attained the maturity date, the insurer pays you a lump sum that is equivalent to the premiums you have paid during the course of the plan. This way, you receive all your outlays back, so your net cost becomes zero.

An example of a term plan with the return of premium option

To give you greater clarity about this kind of a term insurance policy, here’s an example. Let’s take the case of a policyholder aged 25, who buys a term plan with the return of premium option. Here’s what the terms and conditions of this plan include.

  • A SUM ASSURED OF ₹1 CRORE
  • A POLICY TERM OF 20 YEARS
  • ANNUAL PREMIUM OF ₹30,000 PAYABLE FOR 20 YEARS

Scenario 1: The policyholder dies before the 20 years are complete

Here, the beneficiaries of the policyholder will receive the sum assured of ₹1 crore.

Scenario 2: The policyholder is alive after 20 years are complete

Here, the insurer pays the policyholder the total amount of premium received, which is ₹6,00,000 (₹30,000 payable for 20 years)

How does the return of premium option work?

Term Plan with Return of Premium from Canara HSBC Oriental Bank of Commerce Life Insurance

Canara HSBC Oriental Bank of Commerce Life Insurance offers iSelect Star Term Plan that comes with a Plan option - Return of Premium. One of the best-selling features of a term insurance policy, term plan with ROP may be just what you need to ensure that the future of your family members is secure and you have your financial needs covered. Life is often unpredictable, and in the unfortunate event that something untoward happens to you, the surviving members of your family may find it tough to get through in your absence. This is particularly true if you are the sole breadwinner or the primary earning member in your family.

The loss of a key source of income can leave your loved ones financially unprepared to meet their everyday expenses. With Canara HSBC Oriental Bank of Commerce Life Insurance iSelect Star Term Plan, you can help your spouse, children, or dependent parents get through tough times like these without much trouble. This term plan from Canara HSBC Oriental Bank of Commerce is one of our best term plans and offers some very attractive features. Here's a quick look at the best of these.

Life insurance cover at affordable price that will help you align your life goals as per changing life stages.

Multiple premium payment options including single lump sum payment for the entire term

Option to pay premium for a limited period of 5, 10, 15, 20, or 25 years or even upto the time one attains 60 years of age

Freedom to choose your benefit payout pattern from any one of these three options: lump sum, monthly income, and part lump sum and part monthly income


Option to choose between three different proportions for the part lump sum and part monthly income alternative: 25%-75%, 50%-50% and 75%-25%

A choice between level monthly income option and increasing monthly income (at 5% or 10% simple interest per annum)

Option to receive your monthly income over 120 months, or till the end of the policy term or 40 years, whichever is earlier

5 Reasons you should Buy a Term Plan with Return of Premium Option


1. Adequate Life Cover at Low Cost

You need a term cover large enough to take care of everything for your family in your absence. Usually, such a cover is 10 to 15 times your annual income. So, if you are earning Rs. 10 lakhs a year you need a term insurance cover of Rs. 1 to 1.5 crores. You can have such a cover under term insurance with a return of premium plan at affordable cost.

2. Same Benefits and Features as in a Normal Term Plan

A term plan with a return of premium option is the same as a standard term plan. Return of premium is an additional feature which encourages people to opt for this cover. Features such as regular income pay out, monthly mode of premium payment, and additional riders like accidental cover and child support benefit are still available in a term plan with return of premium option.

3. Boost your Retirement Funds with Return of Premium

As there is no investment component in a term plan, you do not get any returns on the money invested. At best, it gives peace of mind that the Sum Assured will take of your families’ expenses when you are not around. However, with the return of premium options, you can look forward to getting the premiums back and investing them into retirement funds if you outlive the policy term.

4. Incremental Sum Assured

Needs and aspirations keep evolving as one progress through the journey of life. Getting married, buying a new house, having children, paying for their education etc will make one want additional life protection to ensure smooth continuity of life for near and dear ones. iSelect Star term plan allows increasing the Sum Assured to match the life stages. You can secure your life at each of the milestones.

5. Save Tax

Amount paid towards the premium is deductible under Section 80C. Whereas, the amount drawn either as Sum Assured or as Return of Premiums, at the end of the policy period, is exempt from tax under Section 10(10D). Tax benefit under Section 10(10D) is applicable for a term plan if the premium is less than 10% of the sum assured or the sum assured is at least 10 times the premium.

What are the Benefits of a Term Plan with Return of Premium?

Term insurance plans with the return of premium option are particularly beneficial for people who wish to combine the affordability of a term plan with the maturity payouts of a regular life plan. Here’s how the return of premium feature can be beneficial to you.

When you invest in a term plan with the return of premium option, you’re setting yourself up to receive all your expenses back at the end of the policy duration. In other words, your outlays, although not redeemed with additional benefits, are nevertheless returned to you. This is financially better than a regular term plan, where the premium you pay remains with the insurer in case you survive the duration of the policy. Consequently, you receive no payouts if you outlive your term plan.

The return of premium feature can be beneficial to you irrespective of the stage or phase of life you are in. Here’s how.

Insurance
If you are single

If you are single, you probably have parents who are financially dependent on you. Investing in a term plan with the return of premium option gives your dependents death benefits in case of your untimely death, much like a regular term insurance policy. In addition to this, the return of premium feature ensures that if you survive till the time of policy maturity you receive your premium back on the completion of the policy’s duration. This inflow of funds due to return of premium can be useful to help support your dependent parents. Even if you do not have any dependents, the premium refunded is a windfall you can benefit from.

Investment
If you are married and have no children

Your spouse may or may not also be an earning member. In either case, the death benefits paid out in case of your demise can help your spouse meet any major expenses following your death. The payouts can also help your spouse repay any debt you may have left behind. On the other hand, if you survive the policy, you still receive the premium you paid throughout the term of the plan. This helps you and your spouse pay for any life goals you may have at that stage in life, like travelling the world, making the down payment for a new house, or foreclosing any open debts.

Money
If you are married and have children

If you have a spouse and children who are dependent on you, then you’ll find that a term plan with the return of premium option can be particularly beneficial. Since the duration of these term plans is generally 10, 20, or 30 years in length, you can structure your plan so that you receive your premiums back just when your children attain marriageable age or right when they are ready to head off to college. The payouts received from your insurer can help you meet significant expenses at that point in life, such as your children’s wedding expenses or the cost of their higher education.

What are the conditions under the Return of Premium option?

In order to enjoy the benefits of the return of premium feature, there are some requirements that need to be fulfilled. Here’s a quick look at these points.

Survival till maturity

If you are the policyholder, you need to have outlived your term insurance plan in order to receive your premium payments back. In other words, you should have survived past the policy’s maturity date. In case of your untimely death during the duration of the life cover, your family receives death benefits from the insurer, and the concept of return of premium does not come into operation.

Active life cover

The life cover offered by your term insurance plan must remain active if you wish to claim the premium paid as a refund at the end of the policy’s term. If your policy has lapsed due to reasons like non-payment of premium, then it effectively means that your life cover is no longer in place. Because this violates the essential requirement that your life cover should be active, you will not receive your premiums if your policy has lapsed.

Top features of policies with return of premium option

Policies that come with the advantage of return of premium also offer a variety of other defining features. Discussed here are some of the top features of a term plan with the return of premium option.

Multiple policy term options

The policy terms can range from 5 years to 30 years or more. Some term plans also offer whole life coverage. You can choose a policy term that aligns with your financial goals and your overall investment plan.

Flexible premium payment terms

Term plans with the return of premium option also allow you to choose from different premium payment terms like the regular pay option, where you pay premiums throughout the policy term, the limited pay option, where you only pay premiums for a limited duration of 10, 15, 20, or 25 years., or even single pay option where one can pay all the premiums together one time at the inception of the cover.


Choice of premium payment modes

You can also choose to pay your premiums on a monthly, quarterly, half-yearly, or annual basis. This choice depends on your financial commitments and your convenience.

Sizable sum assured

Term plans are popular for the high sum assured they offer for relatively lower premium rates. The same holds true for policies with the return of premium option as well. For an affordable annual premium, you can enjoy eligibility for a substantial life cover.

Tax benefits

Term insurance policies also offer tax benefits as per section 80C of the Income Tax Act. The premium you pay is deductible from your total income up to ₹1,50,000. Furthermore, the death benefits received are also tax-free as per section 10(10D) of the Income Tax Act.

Frequently Asked Questions

The frequency and schedule of premium payments vary greatly from one plan to another, and also differs significantly from one insurer to the next. Generally speaking, there are 3 types of premium payment options, as listed here.

As a general observation, term plans are more affordable than other life insurance plans. This is because they are purely protective covers wherein the entire premium you pay is utilized towards building the death benefits. A regular life insurance plan, on the other hand, tends to have an investment component as well, making it more expensive.

If you opt for a term insurance plan with the added advantage of the return of premium feature, you will still continue to enjoy the advantage of affordable premiums, because the plan is a purely protective life cover. However, since you’re receiving the additional benefit of return of premiums paid, the premium charged for these plans tend to be higher than term plans that don’t offer this feature.

Know More

A regular term plan is a pure protective cover that only focuses on offering your surviving beneficiaries a death benefit. What this means is that the premium you pay goes entirely towards contributing to the life cover. There is no element of investment involved. So, if you pass away before the policy reaches the maturity date, your nominees receive the death benefits under the plan. On the other hand, if you outlive the policy, you do not receive any money. The premiums you paid during the policy’s duration become expenses that you cannot redeem.

On the other hand, when you opt for a term plan with the return of premium option, the insurer returns the total premium paid by you when the plan reaches maturity, provided you outlive the policy.

Know More

Understanding how life insurance policies with the return of premium feature work will give you a better idea of how they can benefit you. So, here’s a clearer look at how these policies work.

  • You invest in a term insurance plan that comes with the return of premium feature.
  • You pay the premium over the course of the policy’s duration.
  • Years later, the policy reaches maturity, and you have outlived the policy.
  • Now, since you have survived, the question of paying out death benefits does not arise. And since this is a term plan, which is a pure life cover, there are no maturity benefits.
  • However, thanks to the return of premium feature, the insurer returns the premiums you’ve paid during the term of the policy.
  • So, you receive all the expenses you incurred to remain invested.

Generally speaking, the premiums paid to purchase and remain invested in a term insurance policy are not refundable. In case you pass away before the policy’s duration is complete, your beneficiaries receive death benefits as a payout from the insurer. However, if you outlive the policy, you will not receive any financial compensation, since there’s no investment involved in term insurance plans.

However, if you invest in a term plan with the return of premium option, you get your premium payments back at the end of the policy term, provided you survive the period. In this case alone, the premiums paid for term life insurance are refundable.

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