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Term Insurance Plans with Return of Premium: Best for people looking for investment element in life insurance

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The uncertainty and unpredictability of events in life are enough reasons for one to buy a life insurance policy. Life insurance, apart from protecting your family from the unexpected financial disasters due to instances such as accidents and critical illnesses, gives them a financial stability from the eventuality of death of the bread winner. Essentially, life insurance is there to give your dependents financial protection if you die, usually as a lump sum or staggered payout depending upon your specific needs and requirements.

With the significant economic growth, the incomes of people may have gone up multiple times but the expenses have also shown a sudden splurge due to discretionary spending. In addition, increased liabilities and dependents have also forced people to invest in term plans as the usual profile of people seeking such a cover is that they either have kids or liabilities like unpaid debts. Most importantly, a term plan is the only kind of insurance policy that you need to have because it gives you the maximum cover for the lowest cost. Moreover, now you can buy term insurance even till the age of 99+ years which was not possible to do till a few years back.

Term Insurance with Return of Premium

A popular concept under term insurance, Return of Premium (ROP) insurance means all the premiums are returned to the insured as maturity benefit. The product promises to work out great for everyone looking for guaranteed cash value while buying an insurance plan. As a policy seeker, you can select the term period that matches your specific needs and requirements. Indians as customers expect at least some return from life insurance policies and it can be from the capital at least. For investors more concerned about return, ROP is a value-for-money policy.

Term of Policy

As an investor, you can decide on the term or duration as per your financial situation. Generally, the policy is available for 20, 25, 30 and 40 years. For instance, you can buy a 20-year term life plan if you have a 20-year loan to repay and unfortunately if something happens to you within the term, you won t have to worry about the repayment of the loan. And in case you outlive the term, you will get back 100% of your premium invested.

Benefits on Maturity

The maturity or survival benefits for a Return of Premium plan are quite different from that of a traditional term policy. Under a ROP plan, the insured is paid back the premium for the number of years insured. Under many plans, the insurer even pays more than the premium paid provided certain conditions are met by the insured. Also, the entire maturity amount received by the insured remains tax free.

Payment of Premium

For convenience of the customers, insurers have introduced various premium payment plans that offer great flexibility. You can now choose a payment option that best suits your financial situation. The standard premium payment options available in the market include Annual, Semi-Annual, Quarterly and Monthly. Some of the insurers even provide a single premium payment option wherein you can pay the premium for the entire term in one go.

The following is a comparative table of 5 leading insurance companies offering Return of Premium term insurance with Rs 1 crore sum assured for a non-smoker, 30-year-old man who earns between Rs 7 to Rs 10 lakh annually. The cover is up to 65 years of age.

(By Santosh Agarwal, Chief Business Officer- Life Insurance, Policybazaar.com)