What is a Term Insurance with a Return of Premium

Whether you have the responsibility of taking care of your family or you are yet to even start a family, term insurance is something that you all must invest in. Life is unpredictable and it is quite important to put your money into a term plan so that your family can have the means to take care of their financial needs, even if you are not around. Before we delve deeper, let us understand what a term insurance plan is.

What is a term insurance plan?
Term insurance is a form of life insurance that is easily available in the market and offered by various insurance companies. One who buys and invests in one such plan is called a policyholder. The plan can be bought for 10, 20, or even 30 years, and until that period, the policyholder will keep on putting on money into it. In case, in between this period, the policyholder passes away, the beneficiary of the plan will get a certain amount of money. If the policyholder starts this plan at an early age and takes the policy for a longer tenure, and invests around INR 10,000 a year, the beneficiary may even get a lump sum of INR 1 crore. Some term insurance policy enables the beneficiaries to take the amount at once or receive it monthly or yearly.

What is a term plan with a return of premium?
There are various types of term plans that you may come across in the market. Nevertheless, if policyholders want a term plan that offers survival benefits as well as the death benefit, they can choose term insurance with a return on premium. One of the major benefits of a term insurance plan with a return of premium is that the policyholders get all the premiums that they paid during the tenure of the policy when the plan gets matured.

When policyholders take a regular term, they pay the premium and if they lose their life in between that tenure, the money goes to the beneficiary, but no amount is paid if they survive to post the term. On the other hand, when the policyholders buy term insurance with return and they pass away before the tenure ends, the money goes to the beneficiary. If they survive after the tenure, they will get the money once the tenure is over. However, the money the beneficiary will get is the sum of all the premiums paid.

The basic difference is that in a regular term, the beneficiaries get the death benefit. In a return for a premium term plan, the beneficiaries get the death benefit in the event of the death of the policyholders; and if the policyholders survive through the tenure of the plan, they get back all the money they put in the plan in form of premium. However, anyone who is planning to take term insurance with a return of premium must be aware of the fact that they will not get any extra money apart from the premium they invested if they survive.

For example, you can take a term insurance plan with a return of premium for a sum assured of INR 50 lac for 10 years and you pay a yearly premium of INR 5000 yearly. In an unfortunate situation where you are no more, the beneficiary will get INR 50 lac. On the other hand, if you survive the policy tenure, you will get only INR 50000 with no extra money.

To know more about term insurance and return of premium, you can visit IIFL Insurance Knowledge Centre. Apart from term insurance, you will also come across several other insurance products which may interest you. Many companies are offering such term plans to the customers. You can compare the term plans offered by the companies at IIFL Insurance and make up your mind to choose the one that suits your needs