Best term insurance plan with return of premium Benefits

Best term insurance plan with return of premiumWhat are the benefits of best term insurance plan with return of premium…?

Before jumping onto find the benefits it is important to understand,

What term insurance mean…?

It is one of the simplest and cheapest forms of life insurance that you can get for yourself.

Term insurance is actually meant to uncomplicated things. The premium paid under such a plan goes to financially secure insured’s life which his family receives on his death.

Thus,

It’s a pure life cover plan which doesn’t pass any maturity benefits.

This simply means that if an insured survives the policy period then the policy expires worthless. Thus to further stay insured he has to renew his policy for a new term, say for next 20 years or so…

But what if, you want to buy insurance and don’t want to waste your money either…!

Will there be any such plan….!

YES

Fortunately there is…

Here is where Return of premium rider comes in, which is among the different types of insurance plans.

What it is….?

It’s an add-on benefit that you can have along with your term plan. Return of premium rider promises to pay your entire premium back to you on maturity.

Thus,

Your entire money (premium less insurer’s fees if any) is refunded on the expiry of the policy.

This way you never lose your money at all, as:

  • You get maturity benefits: Your premium is returned to you on the expiry of the policy.
  • An insured gets death benefits: On the death of the insured the family receives much needed cash to make their living.

With the benefit like such,

You turn your insurance policy into a sort of investment which rewards you at maturity.

How your best term insurance plan with return of premium works…?

Working

As already said that you will receive maturity benefits under your return of premium plan:

Thus,

If “Mr. X” buys a cover of Rs.50 lacs for 20 years and if his premium turns out to be 5000 annually then,

  • On Maturity: If he survives the policy period, he will receive 1 lac (less any fees), i.e. Rs.5000 * 20 years.
  • On Death: His family will be paid Rs.50 lacs. if he dies within the policy period.

This is surely a good plan for money minded people as they get dual benefits of both insurance and investment.

But is return of premium insurance plan cost effective…!

Are they really worth your money…?

Are they worth your money...?

Well they can be…

It totally depends on your budget. By paying little extra if you can have your money back then why not…!

Take a look at what Aviva has to offer you under iShield return of premium plan

Aviva

They are offering a guaranteed 110% of your premium at maturity of your policy. Thus if in the above e.g. where “Mr. X” was paying Rs.5,000 annually then on the expiry of his policy term he is sure to get Rs.1,10,000/- {i.e. 5000 * (110/100) * 20 years}.

How rational it is to invest in Return of premium plan…?

As compared to your term plan, you pay a little extra when you buy a rider. Thus your premium under term plan with rider can go up by 10% to 20%.

How rational it is...?

Under this plan your money doesn’t necessarily grow but you don’t lose either.

If you buy the rider keeping investment motive in mind then you will be better off investing in mutual funds.

They have recently shown tremendous year on year growth. So, if you plan to grow your money and want to stay insured at the same time then buying a pure term plan along with Mutual funds will be a good deal.

To check out which mutual fund will work best for you, you would want to read this report from Economic times.

Now since you know that you will be more well off investing in mutual funds rather than Return on Premium,

The question comes,

Why anybody would want to buy Term insurance plan with return of premium…?

The main reason that drives people to buy such a rider is:

  • Financial security of their family and
  • Safety of their own premium.

What drives you...?

You may not want to gamble with your money but may definitely want safety and guaranteed returns.

It is this assured return that drives people to take action and buy the rider. Other factors that motivate people to buy the plan are:

  • It offers refund of your premium if a policyholder outlives the policy.
  • It gives an assured guarantee of what your premium will earn over the years.
  • You get tax benefits not only on the premiums paid but also on the cash received at maturity. Currently, you get tax benefits under section 80C and section 10(10D) of Income Tax Act, 1961.
  • Since you will be building cash value over time, you would be able to use this as an asset against loan.
  • Your term insurance plan with return of premium will work on a level term insurance concept. This will mean that your premium amount would stay same throughout the life of the policy.

Tips to buy best term insurance plan with return of premium benefits.

Tips to buy your term insurance plan with return of premium

  • When buying a policy, always try to go with higher sum assured. This will not only give you higher coverage but will also save you money in the long run.
  • Go for longer terms, as this will keep your premium leveled for long. When once the policy expires then it usually gets renewed at higher premium. This might disturb your budget later on. Thus if you can afford then it will be a good idea to choose longer policy terms.
  • Never ever consider maturity benefits to buy your policy. This is because the plan that offers higher returns at maturity might not be the most cost efficient plan for you.

Read the policy documents carefully; judge your needs and then only jump to buy your best plan.

As,

“The safer you play the better you will be.”