People who invest in a life insurance policy usually look at it like any other type of investment. They pay the premium expecting a huge payout when their policy matures. When you invest in a term insurance, your insurer is expected to pay your family the guaranteed sum assured under your plan.
This payout, however, will only be given to your family in the event of your untimely demise. If you survive the term period, there is no maturity benefit. This could be discouraging for many who expect some kind of maturity benefit. You can opt for an online term plan which offers return of premium (ROP). What is this ROP term insurance? And what are the benefits? Read more to find out.
A term insurance plan is a type of life insurance policy. When you invest in this plan, your insurer will give your family a specific sum assured mentioned in the plan. This amount is given after the sudden demise of the policyholder. The payout can help the family of the deceased to cover major expenses without facing financial uncertainty. When you opt for a online term plan, you can choose from a range of plans that suit your requirements and budget.
What is return of premium?
Let us consider an example. Rahul decided to invest in a term insurance plan for 30 years. The yearly premium of the plan is Rs.10,000, with the sum assured of the plan being Rs.30 Lakhs. If Rahul were to pass away during this policy duration of 30 years, the insurer will pay Rahul’s family the sum assured under the plan. That would be Rs.30 Lakhs in this case.
However, if Rahul survives the term of the plan, he will receive the entire premium amount which he paid towards the plan. That would Rs.3 Lakhs. This is what is known as return of premium in term insurance. The feature guarantees that the policyholder receives some form of maturity benefit for their investment in the plan.
What are the benefits of return of premium?
When one talks about term insurance benefits, they are mostly referring to the sum assured that their loved ones get as compensation. However, with return of premium term insurance you get to enjoy the following benefits:
1. Premiums are returned
Just like the name of the policy suggests, the premium that you pay towards the policy is returned to you if you survive the term of plan. This could be beneficial as you receive some form of maturity benefit for the money that you invest in the policy. The benefit would be less compared to the sum assured as it is just the premium which is being returned. However, this can be looked at as minimal returns for your investment instead of getting nothing after your plan matures.
2. Death benefit is available
When you opt for this plan, it does not cancel out the death benefit that your family would receive in the event of your sudden demise. The return of premium is entirely dependent on the basis of your survival during the term of the plan. If you were to pass away during the term, your family would receive the sum assured offered under the plan. So, the death benefit remains regardless of which plan you invest in.
3. You get tax benefits
The premium that you pay for your term insurance are tax exempted under Section 80C of the Indian Income Tax Act. This is not the only benefit. If you survive the term and get your premiums in return, this pay-out is also eligible for tax exemption. Under Section 10(10D), the returns from the plan get tax-exempted.
4. Add-ons are offered
Apart from the sum assured and the maturity benefit, you have the option of adding riders to your plan in order to enhance its coverage. Riders such critical illness rider, hospital cash and personal accident rider can be included in the plan. This would increase the premium; however, it also provides added benefits.
If you want to invest in a term plan but are also concerned about term insurance benefits apart from the sum assured; you should opt for return of premium (ROP) term insurance. You can get in touch with your insurance advisor to know more.