How to Get Back your Entire Term Insurance Premium

Over the years, term insurance has evolved significantly. Today, the insurers offer a variety of term plans with unique features and benefits. One such plan is where you can get your entire premium back. Read on to more about it.

Term insurance is one of the simplest types of life insurance policy; it is easy to understand for all. In a traditional term insurance policy, the insurer pays the policyholder’s family the death benefit, in the event of their untimely demise during the policy period. But, if the policyholder outlives the policy tenure, they lose the entire premium as it does not offer survival benefit.

Many people saw this as a major drawback of the term plan. And, to address this issue, many insurance companies in India now offer a term plan with return of premium option.

What is a term plan with a return of premium?

A term plan with return of premium is similar to the standard term plan; it provides coverage against death and pays the sum assured to the policy’s beneficiary. However, one of the key things that sets the term plan with a return of premium than the traditional plan is that it provides maturity benefits to the policyholders.

Unlike the traditional term insurance policy, the term insurance with return of premium pays back the premium when the policy matures. And, the best thing is the insurers give you the flexibility to choose the sum assured, and the policy duration. You can opt for return of premium option for your regular term policy, however you may have to pay an additional term insurance premium for it.

How does the term plan with return of premium work?

When you buy a term insurance policy, it is advisable to determine your purpose of buying the plan. This will help you choose the right type of term plan. Also, knowing how the term plan with return of premium works, will help you make an informed choice and give you a clear idea of your financial plans.

Let us understand the working of this plan better with an example.

Mr. Prakash Parekh, a 30-year-old man is a healthy individual who does not smoke or has any history of medical problems. He buys a term plan with return of premium with a sum assured of Rs. 50 lakhs.

He pays a premium of about Rs. 6100 per annum for 40 years, i.e., till the maturity period of the policy. Now, suppose Mr. Parekh passes away within the policy period, the beneficiary will receive Rs. 50 lakhs from the insurance company.

But, Mr. Parekh survives the policy period, he will be eligible to get maturity benefit under the return of premium. He will receive Rs. 2,44,000 (6100 x 40) upon policy maturity.

Now that you know how the term plan with return of premium works, it would help to understand the benefits of buying a term policy with return of premium option.

Many policy buyers in India avoid buying a term insurance plan mainly because it does not have any maturity benefit. But, with the return of the premium term plan, you can be assured of getting the premium back that you pay throughout the policy term.

When you buy a standard term insurance or term insurance return of premium, the primary purpose is to get life coverage and provide financial protection to the family against untimely death. The death benefit offered with term insurance with return of premium allows the family members to manage their expenses even in your absence. And the survival benefits you may receive after policy maturity allows you to get a lump sum amount that you can invest elsewhere and get valuable returns during your old age.

Lastly, when you purchase term insurance with return of premium you become eligible for tax benefits under different sections of the Indian Income Tax Act. Under Section 80C of the IT Act, the premium paid is deductible to a maximum limit of Rs. 1.5 lakhs per annum. And under Section 10(10D), the death benefits your family member receives is tax-free.