Term insurance is the simplest form of life insurance. It is also one of the most affordable protection plans. It doesn’t have an investment component and guarantees a pre-decided payout if the policyholder passes away. Generally, term insurance plans do not offer any survival benefits. However, with changing financial needs, there are term plans that offer a return of premium. This happens only when the policyholder survives the policy term.
Let us understand term plans with return of premium in this article.
Key Takeaways
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A term insurance plan with return of premium is a pure protection plan that offers to return all the premiums paid during the policy term if the policyholder outlives it. Policyholder may add other family members for the life cover. If the policyholder passes away when the policy is active, premiums will not be returned. The beneficiaries will get the death benefit of the plan.
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Return of Premium is a feature that is generally available as an option. Policyholders may assess their financial needs and goals to choose the right plan option.
Let us take an example to understand how term plan with return of premium works.
Mr. Pal, a 25-year-old man is looking to secure his future with a term plan. He is a healthy man who doesn't smoke or has any history of medical problems. He opts for a term plan with return of premium and selects a sum assured of Rs. 50 lakhs as per his current financial need.
Suppose the annual premium payable for the plan is Rs. 10,000 for a tenure of 40 years. If Mr. Pal passes away within the policy term, the nominee will receive the sum assured of Rs. 50 lakhs.
However, if he survives the policy term, he will be eligible for a maturity benefit under term plan with return of premium option. He will receive Rs. 4,00,000 = 10,000 x 40 on maturity of the policy.
Anyone can buy a term plan with a return of premium option. The plan is a pure protection plan designed to meet the protection goals of your life. The minimum and maximum age to buy the plan may vary from one plan to another and from insurer to insurer.
Term insurance with a return of premium offers all the benefits of a regular term insurance plan with survival benefits. It is an ideal option for people seeking life insurance coverage with returns. Here are three benefits of buying this plan:
| Pure Term Insurance Plan | Term Plan with Return of Premium |
|---|---|
| Simple pure risk cover | Term plan that returns the premiums |
| Offers only death benefits to the beneficiaries | Offers death benefits if the policyholder passes away during the policy term. And provides survival benefits if the policyholder outlives the policy term. |
| Designed for people who are looking for only protection | Designed for people who wants a term plan for protection and returns |
| These are generally affordable plans | Expensive when compared to pure term plan |
Yes. Term plans with a return of premium have a grace period like normal life insurance policies. The grace period you get with such a plan is 30 days for accepting the policy terms and 15 days for paying the premium.
Yes. You can add riders to the term insurance plan with a return of premium. The riders you may choose will depend on the options available under the policy that you have.
Know the - benefits of adding riders to the term plan.
Yes. Smoking does impact the premium you have to pay for a term insurance plan. The premium will increase if you smoke regularly, as you are more susceptible to life-threatening diseases.
Learn how - smoking and drinking impacts the cost of a term plan.
With Canara HSBC Life Insurance iSelect Smart360 Term Plan, you can choose annual, half-annually, quarterly, and monthly frequency. Or, if you wish, you can pay the premium in a single go.
There are a few pointers you must consider to buy the best term insurance plan with a return of premium for your financial goals. Finding a term plan that suits all your life goals may be challenging.
Consider the following pointers before buying a term insurance plan that returns the premium:
Canara HSBC Life Insurance offers online term insurance plans to secure your family financially in your absence.
Lucrative deals can be enticing, but at the same time, it is necessary to be vigilant with your choices. There are some things to consider before that can severely affect your profits. Let’s cover some of the most common mistakes people make while purchasing a term insurance plan.
Not choosing the right coverage amount: The plan would not serve its purpose if your family stays vulnerable even after they claim the insurance. Make sure to select the one with a coverage 10 to 15 times more than your annual income.
Ignoring the policy tenure: The term should align with your financial expectations. A shorter policy term may not have enough coverage.
Overlooking additional riders for enhanced protection: Features like critical illness cover or accidental death benefit often get ignored, but having them can level up your game in terms of extra financial security.
Failing to compare plans before purchasing: Comparison can clear a lot of your doubts. Insurers have different rates and benefits. Weighing up their features can help you find the best one for your suitability.
Not checking the insurer’s claim settlement ratio: A higher claim settlement ratio states that the insurer is reliable. Take Canara HSBC Life Insurance, for example. It has a CSR of 99.23% for individual claims for the year 2023-24, which means minimum chances of claim rejection.
A term insurance plan with a return of premium offers a comprehensive financial safety net. It not only provides protection for your loved ones in case of unforeseen events but also ensures a financial cushion for your future. By carefully considering factors like coverage amount, premium, and the insurer's claim settlement ratio, you can select the best term plan with a return of premium to safeguard your financial well-being and secure the future of your dependents.
Yes, term plans with a return of premium have a grace period like normal life insurance policies. The grace period you get with such a plan is 30 days for accepting the policy terms and 15 days for paying the premium.
Yes, you can add riders to the term insurance plan with a return of premium. The riders you may choose will depend on the options available under the policy that you have.
Yes, smoking does impact the premium you have to pay for a term insurance plan. The premium will increase if you smoke regularly, as you are more susceptible to life-threatening diseases.
With the iSelect Smart360 Term Plan from Canara HSBC Life Insurance, you can choose annual, half-annually, quarterly, and monthly frequency. Or, if you wish, you can pay the premium in a single go.
The policyholder receives the total premium paid back (minus taxes and charges) as a maturity benefit.
Typically, the minimum age to buy a term plan with a return of premium is similar to a regular term plan (usually 18-20 years). However, specific criteria may vary between insurers.
Yes, most insurers offer critical illness riders as an optional add-on to term plans, including those with a return of premium.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
