People choose several kinds of Life Insurance plans and schemes to secure their future financially. But to get the desired result and meet the financial goal, it is quite important to choose the right term plan. One such insurance is term insurance with Return of Premium. To know its benefits, why one needs it in their lives, and its uses, they must get a basic understanding of this term plan.
The term insurance with return of premium in a certain kind of insurance policy that offers coverage for a specific time. In case the premium owner passes away during the tenure, their beneficiary will receive the premium insurance money from the insurance organization. This pay will be known as a death benefit. One of the biggest advantages of this insurance policy is the fact that the amount that has been paid in the premium can be refunded completely upon the completion of the term tax-free. In other words, it can be explained that the investor or premium holder can get their money back without paying for something that they have not used.
It is important to note that, term insurance with return of premiums is comparatively more expensive than that of a traditional insurance plan.
The Function of Term Plan with Return of Premium
The functionality and the process of the Return of premium insurance are quite easy. Following are 4 steps through which the work of this insurance policy can be explained in detail.
– The Return of Premium life insurance can be purchased for a term of either 10 years, 20 years, or 30 years.
– To keep the policy active, one must pay the premium payment on either a monthly or yearly basis based on their convenience.
– As already discussed, upon the death of the premium holder, their beneficiary will be paid the money. The premium is as high as the coverage amount of the insurance policy.
– If the person who has opened the policy outlives the term plan, they will be paid back the whole amount at the term-end.
Features of Return of Premium
– Maturity or Survival Benefits: When the insurance matures and the insurer outlives the premium term, they can get the whole money back with the tax deduction applicable after 1.5 lakhs.
– Sum Assured: The sum that an insurer invests in this premium is returned without ant deduction made by the insurance company.
– Surrender Value: Based on the payment option, the premium plan varies with the term insurance with return of premium. Single premiums can pay the amount at the initial part of the policy. They can receive the amount later with the term end.
– Death Benefits: The death benefit is the amount that the beneficiary of the term insurance receives upon the demise of the insurer.
3 Benefits of Term Plan with Return of Premium
Like you learn what is FD, and other forms of investment before planning your financial journey. Similarly, it is important to know the benefits of term plan with return of premium. The Term Plan with Return of Premium is a kind of insurance that has been designed for those who want to take care of their loved ones financially and enjoy the benefits of the return on their investment. It is, therefore, safe to say that this term insurance offers a combination of return of premium as well as insurance coverage.
Here is why this term insurance is a requirement for people:
– The term insurance offers a premium refund when the policy matures. As they offer the whole money back, the insurer does not have to worry about the loss of a certain amount at the end of the term.
– The insurance policy also comes with the option of enhancing the policy with rider benefits. The rider option can be taken at the initial signing of the policy or can be added later. It is suggested to take the rider’s enhancement for physical disability or personal accident at the very start. This will ensure comprehensive coverage to the premium holder that too at a minimum additional cost.
– Purchasing term insurance with a return of premium allows insurers to enjoy tax benefits. In today’s time, the paid premium amount and the drawn-out amount are tax-free and come under Section 10 (10D) and 80C of the 1961 Income Tax Act. The exemption applies to a limit of a maximum amount of Rs. 1.5 lakhs.
The Return of Premium Term Insurance is not open to everyone and can be purchased by individuals. It can be taken up by people between the bracket of 21 years to 55 years. This is a very attractive policy as the risk factor is zero and people can enjoy the security of their amount. They can be comfortable in the future and even cover their family members’ future financially.