Term Plan with Return of Premium: Is It Worth the Extra Cost?
In this economy, having a backup plan for emergencies is crucial. You need to prepare for the unexpected with viable earning solutions as well as create a corpus for your loved ones. Term insurance plans are one of the best ways to ensure both. It provides a financial safeguard for your beneficiaries, and with the right planning, it can become a savings fund for your future endeavours.
What is term insurance?
Term insurance policies are a type of life insurance that is available at very affordable premium rates. These policies come with flexible tenures from 10 to 100 years and varied sum assured as per your needs. For a very low premium, you can provide your loved ones with the coverage of 30,00,000 to 10 crores based on their requirements.
Term insurance policies come in different forms, which are as follows:
- Increasing term insurance that grows the sum assured annually.
- Decreasing term insurance decreases, the total sum assured but uses the difference to repay lenders during your lifetime.
- Level-term insurance that upholds the policy terms that you agreed upon during the purchase.
- Term insurance with a return of premium offers maturity benefits.
There are different available choices based on your age, gender, income, etc. Term insurance for seniors may be vastly different from term insurance for young professionals. You can also use riders to address major financial instabilities such as critical illness coverage with term insurance for seniors, accidental death coverage for primary wage earners, and more.
You can evaluate the advantages and disadvantages of the different types of term insurance plans to determine the right fit for you and your loved ones. While some can be used to decrease financial burdens or beat the rate of inflation, others can serve as savings plans to help you navigate financial stresses.
Why is a term plan with return of premium so desirable?
Normally, Term insurance policies do not offer maturity benefits due to the low premium rates and flexible tenure. However, you can opt for return of premium with a little extra cost.
Term plan with return of premium guarantees that if you survive the policy tenure, then the insurance provider will refund your premium investments in the policy. There are many benefits to opting for this type of term insurance plan.
If you are purchasing term plans for young professionals or primary wage earners, it is important to consider the policy, tenure and coverage that will help take care of the family. However, it is also important to consider that the premiums invested in your policy should not seem like a total waste. The idea is to live a full and healthy life but also ensure that your hard-earned money is utilised for your benefit. Term plan with return of premium assures that all your investments return to you as a lump sum payout.
When you receive the maturity benefit from the term plan with return of premium, you can use the lump sum amount to address immediate financial concerns or invest it in your future.
On the other hand, when purchasing term insurance for seniors, the Return of premium is not the primary concern. Unfortunately, the likelihood of senior citizens surviving the policy tenure is less than that of young professionals. Therefore, purchasing term insurance for seniors with the return of premium may not be worth the extra cost. Instead, an increasing or decreasing term plan may be a more suitable solution.
Term plan with return of premium is ideal when you want to build a savings plan but also ensure the future financial well-being of your loved ones. In the event of your demise during the policy tenure, the insurer will pay the sum assured as a death benefit to your beneficiaries. If you survive the policy tenure, you receive the maturity benefit that can be very useful to you during your lifetime.
Based on the coverage of your term plan with return of premium, it may turn into a substantial corpus. If you choose adequate policy tenure, then the payment plan will be divided over a longer duration, which would reduce the total annual premium. Ergo, you may be entitled to tax benefits on your term insurance premiums, which will help you save money in real-time. Additionally, if the annual premiums satisfy the income tax criteria, then the death benefit and maturity benefit are also eligible for tax exemptions.
Conclusion
Taking into account the different advantages of term plan with return of premium, it is safe to say that it is worth the extra cost, especially if you are young or in your prime years. However, if it is a term insurance for seniors, a return of premium may be helpful to navigate their golden years. Either way, you and your loved ones stand to benefit from a term plan with return of premium.
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