On the rollercoaster of life, you will face many ups and downs. However, if anything unfortunate befalls you, you can ensure your family’s financial safety by getting a term insurance plan. Term insurance for your family will provide them with financial assistance in your absence. A term insurance plan provides sufficient coverage at very affordable rates. If you meet your untimely demise, your beneficiaries will be provided with the death benefits. However, If you survive the term, then there are no returns or maturity benefits that you can earn from a pure term plan.
This is why a term plan with a return of premium has gained some popularity with those seeking risk-free returns on their term plan premiums.
How does a term plan with the return of premium work?
A term plan with a return of premium offers the policyholders with guaranteed returns. In this plan, if you meet an unfortunate demise, your beneficiaries will get the sum assured, and if you survive the tenure of the plan, you will get the maturity benefit. The maturity benefit will be the sum of the premiums paid towards the plan. For instance, if your plan’s premium amount is ₹2000 monthly for a tenure of 10 years, then the survival benefits you get through your plan will be ₹20,000 (₹2000 * 10).
Features of a return of premium term plan:
- Death benefits:
A return of premium term plan offers the total sum assured amount as a death benefit to the beneficiaries if the insured passes away because of an unfortunate event. Different insurers provide the sum assured amount depending on the plan, cover type or premium payment mode.
- Maturity benefits:
The ‘survival’ or maturity benefits offered through a term plan with premium returns make it an optimal plan for individuals looking for assured returns. A pure term insurance policy does not offer any maturity benefits to the policyholder. However, in a return of premium plan, if the policyholder survives the policy term, they get the sum of all the premiums paid towards the plan as a maturity benefit.
- Surrender value:
A surrender value is an amount a policyholder receives when they exit a policy before it reaches maturity. The surrender value for the return of premium term plan varies according to the premium payment. This value is more for a single premium plan where the policyholder pays the entire premium for the policy at the time of policy purchase. Insurers may have different methods of calculation for getting an estimate on surrender value.
- Paid-up value:
The paid-up value is the reduced sum assured provided by the insurance company if the policyholder stops making premium payments after a certain period. With the paid-up value, the plan will continue to be in effect, even if the policyholder cannot pay the premium. However, the insurer will reduce the coverage amount. Many companies require the policyholder to pay the premiums for a specific number of years before offering this benefit.
- Riders:
Riders are the additional coverage you can add to your insurance plan. Adding riders to the plan will increase the amount you pay as premiums. Some of the riders most commonly added to a term plan are:
– Personal accident or Disability Rider
– Hospital cash
– Critical Illness Rider
In conclusion, the return of premium term plan is the best term insurance plan for individuals looking for term insurance coverage with survival benefits. Though a return of premium term plan may not be the best-guaranteed returns plan, it is surely a safe way for risk-averse investors to earn returns on their term plans.
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