Every individual strives to maximize the return on investment. As an investor, you consider your long-term goals and work towards fulfilling every dream of your family. Investors purchase life insurance to ensure the financial safety of their families in their absence.
With a range of options offered by term plans, it has become difficult to choose one.
Term insurance is an affordable insurance plan which provides financial coverage for a specific period.
On the death of the policyholder before term maturity, the company pays a death benefit to the beneficiary. The plan offers higher coverage at a low premium. It will not only ensure that your family is financially independent but will also provide for the higher education of your child.
Anyone not less than 18 and over 65 can purchase a term plan. The minimum sum assured is INR 10, 00,000 and it will cover you for any unforeseen events. Term plans are popular for a reason. They offer you a choice of low premium and are applicable for a specific period.
However, some consumers expect returns from their investment in a term plan.
Indian customers worry about their returns from life insurance policies and expect something in return on their investment.
Term plan with a return of premium if the investor survives
If you are worried about your investment in a term plan, you can opt for Term Plan. It is a term plan with death benefits. There will be returns on the premium paid if the policyholder survives the policy term. In regular term insurance, insurers will pay only when the insured person dies, but with a return of premium, investors will be able to benefit from a return in case of survival.
Consider an investment in a policy of INR 50 lakh for 20 years. The annual premium for the same is INR 5,000. If the insured dies, the family will receive the entire policy amount insured, which is INR 50 lakh.
However, if the insured survives, the insurer will have to return the premium which is INR 1 lakh. (5,000 X 20).
The return of premium has a range of payment options. There are options for choosing to pay the premium throughout the term and paying full premium at the time of subscription to the plan. There is also an option to pay premiums for a short term and gain protection for a longer duration.
Depending on your ability to pay the premium and your requirement for the cover, you can make your choice. There is also a paid-up option available in the plan. It means in case of default in the payment of premium; the policy will continue but with reduced benefits.
In this case, you get back the premium at the time of maturity, but the nominee will receive a reduced amount if the insured dies. The surrender benefits will also differ from plan to plan.
Hence, it is essential to understand the policy terms and conditions before deciding to invest. Some policies also provide add-on protections which the investors must pay.
Related: 5 Key Factors To Take Into Account Before Buying A Health Insurance
How does the term plan with return of premium fare?
There is not much difference when it comes to regular term plans and the return of premium plans. However, the return of premium plans is expensive since the benefit is specific. Therefore, the premium will be higher than that of a regular term plan.
The method is ideal for individuals who consider that the term plan does not provide enough coverage to their family and are expecting a higher return on the premium paid. With a higher premium amount, investors will be able to generate higher returns from the investment in case of survival. Since you get back the premium amount, the plan will cost higher than the regular term plan.
It is an attractive option for investors who worry about their investment in the term plan and seek a lot more from it. The plan is suitable for investors who seek a return on the investment in the policy and are ready to pay a higher premium amount for the same.
With the guaranteed return of premium, the policy will be of a higher value for the investor.
Instead of worrying about term insurance plans, start investing in it right now for a secure future of your dependents.
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