What is The Benefit of Term Insurance with a Return on Premium?

In India, every hour approximately 53 accidents take place, and nearly 17 lives are lost. Also,  83 people die of drowning every day in the country. With a high death rate, the country should have a great insurance coverage. Although, the reality turns out to be a bit different. A majority of the population does not have appropriate insurance coverage. A combination of complex products and high premiums may have been a reason for low life insurance insight. However, term insurance can make life insurance accessible for a lot of people.

What is a term insurance plan?

Term insurance is considered the simplest and the most affordable life insurance product. It does not have an investment section and simply guarantees a pre-decided payout on the death of the person who is insured with the plan. Generally, term insurance plans do not consist of any survival benefits. The premiums of the policy are quite low at the beginning but with time slowly 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.

What is meant by term insurance with a return of premium?

A regular term insurance plan may not be the perfect product but there are multiple types of term plans. Policyholders who want a term insurance plan that offers survival benefits along with death benefits can select a term insurance plan with a return of premium. The best thing about term insurance with return of premium or TROP is that the policyholder gets all the premiums paid over the policy tenure back when their policy is matured.

The Benefits of Buying a Term Plan with Return of Premium

If you have term insurance with return of premium, you can avail benefits of both a regular term insurance plan and survival benefits. It is a perfect option for people looking for life insurance coverage with guaranteed returns. The three benefits of buying term insurance plan with return of premium are:

1. Return of Premium Benefit

Term insurance plans do not offer any maturity benefits. However, if the policyholder outlives the policy term, they can get all the premiums back with a term insurance plan with a return of premium. iSelect Smart360 Term Plan from Canara HSBC Life Insurance has a return of premium feature. The benefits recieved can be used for any purpose.

2. Death Benefit

Optional riders can be used to cover accidental death, accidental disorder, and serious illnesses. A term insurance plan with a return of premium with suitable riders provides comprehensive coverage at affordable rates.

3. Tax Benefits

Investing in term insurance with a return of premium offers the policyholder the opportunity to reduce their tax liabilities. The premiums paid for the policy are entitled for tax removal of up to Rs 1.5 lakh per annum under Section 80C of the Income Tax Act, 1961. The payout is spared from income tax under Section 10 (10D) of the tax laws.

Conclusion 

There are many life and term insurance plans available these days. A lot of life insurance plans offer returns, but the returns in many cases are market related  and are not guaranteed. The lump-sum amount received at maturity can be used either to buy a car or to renovate your house. Having a clear picture helps in proper financial planning. On the other hand, term insurance with a return of premium is beneficial. It is a perfect product for people who do not want to lose out on the premiums and are expecting  some kind of return from the policy.

Also read: Important Insurance Ratios to Know About