Every hour 53 accidents take place on Indian roads and 17 lives are lost. Similarly, 83 people die of drowning every day in the country. With a high mortality rate, the country should be having widespread insurance coverage. The reality is slightly different. A majority of the population do not have adequate insurance cover. Complex products and high premiums may have been a reason for low life insurance penetration. Term insurance plans, however, can make life insurance accessible for millions of people.
Term insurance is the simplest form of life insurance. It is also one of the most affordable life insurance products. Term insurance doesn’t have an investment component and simply guarantees a pre-decided payout on the death of the insured. Generally, term insurance plans do not have any survival benefits. The premiums are among the lowest at the start of the policy but gradually increase with the age of the insured. The policyholder pays a higher premium, doesn’t get any returns and the need for a large coverage also decreases. All this makes a regular term insurance plan far from perfect.
A regular term insurance plan may not be the ideal product but there are multiple types of term plans. Policyholders who want a term insurance plan that offers survival benefit along with death benefit can opt for a term insurance plan with return of premium. The biggest benefit of a term insurance with return of premium or TROP is that the policyholder gets all the premiums paid over the policy tenure back at the time of maturity.
A regular term insurance plan pays the sum assured on the death of the insured. There are no payments besides the sum assured. With a TROP, the nominees are paid the sum assured in the event of the insured’s death. But if the insured survives the policy term, he/she gets back all the premiums paid over the policy tenure. For example, you purchase a TROP policy with a sum assured of Rs 30 lakhs, tenure of 10 years and an annual premium of Rs 3000. In the event of an unfortunate incident, Rs 30 lakh will be paid to the nominee. Additionally, if the insured survives the policy tenure, the insurance company will pay Rs 30,000.
A term insurance with return of premium policy offers a host of benefits to policyholders.
Assured returns: There are various types of term plans and a number of life insurance policies are also available in the market. There are many life insurance plans that offer returns, but the returns in many cases are market-linked and are not guaranteed. A term insurance with returns of premium policy offers guaranteed returns. With assured returns, you can plan accordingly. One can use the lump-sum amount received at maturity to buy a car or to renovate his./her house. Having a clear picture of the returns helps in financial planning.
Survival benefit: Contrary to a regular term insurance plan, term insurance with return of premium offers survival benefits. If the insured outlives the plan, he/she is eligible to get back all the premiums paid during policy term. It is an ideal product for people who do not want to lose out on the premiums and want some kind of return from the policy.
Rider benefit: One of the biggest selling points of a regular term insurance plan is its simple structure and options to enhance the coverage. The term insurance with return of premium also offers similar advantages. Policyholders can choose to enhance the insurance cover with optional riders. Optional riders can be taken to cover accidental death, accidental disability and critical illnesses. A term insurance plan with return of premium with suitable riders provides comprehensive coverage at affordable rates.
Tax benefits: Investing in a term insurance with return of premium offers the policyholder the opportunity to reduce his/her tax liabilities. The premiums paid for the policy are eligible for tax deductions of up to Rs 1.5 lakh per annum under Section 80C of the Income Tax Act, 1961. The payout is exempt from income tax under Section 10 (10D) of the tax laws.
Conclusion Term insurance with return of premiums offers all the benefits of a regular term insurance plan along with survival benefit. It is an ideal option for people seeking life insurance cover with assured returns. If you are in the market for a term insurance with return of premium, opt for the iSelect Star Term Plan from Canara HSBC Oriental Bank of Commerce Life Insurance. With the iSelect+ Term Plan, you get the option to receive all the premiums at the end of the policy tenure.