Life insurance is a critical component of every individual’s financial plan. However, due to a lack of awareness of different insurance types and their fundamental differences, most people fail to buy optimum life insurance coverage for themselves and their families. It is imperative that a life insurance policy is chosen after careful consideration of its nature, the extent of coverage, the reliability of the insurance company, premium prices and claim process.
In this article, we shall learn about Regular Term Plan and Return of Premium Term Plan, their differences, and the benefits of choosing a Return of Premium Term Plan.
Difference between Regular Term Plan and Return of Premium Term Plan
A Regular Term Plan is one of the most common types of insurance which offers a lump-sum amount to the beneficiary in case of demise of the policyholder. However, if the policyholder survives the policy term, he/she shall not receive any benefit as survival/maturity payout.
However, if you buy a Return of Premium Term Plan, the policyholder will receive a survival benefit on the maturity of their policy term. It offers all the benefits of a regular term plan. Additionally, it offers the sum of all premiums paid as maturity benefit to the policyholder.
Read on to know more about the diverse benefits you will enjoy with the best Term Insurance Plan with Return of Premium:
Benefits of Return of Premium Term Plan over Regular Term Plan
- Survival Benefits
When you choose a Regular Term Plan, your family or loved one can claim the insurance amount in case of your untimely demise. However, if you survive the term of the policy, you would not receive any benefits from the premiums you paid throughout the insurance policy period.
However, when you choose a Term Insurance Plan with maturity benefits, you can avail survival benefits. This is extremely useful if you are in the retirement phase of your life and can use the money for critical expenses.
- Returnable Policy
The protection offered by Term Insurance Policy ends as soon as the insured stops paying the policy premium amount. But in case of Term Plan with Return of Premium, the policyholder can choose to return the policy and all premiums paid till date shall be reversed back with certain minimal deductions into effect.
- Continued Protection
In case of a Regular Term plan, when the policyholder discontinues to pay the premium amount, the policy collapses. It means, the beneficiary shall not receive any insurance amount after the demise of the insured and regular income (if included in the policy) are also held back.
However, with Return of Premium Term Plans, the policy continues to be in effect even if the policyholder misses to pay the premium amount. But you must note that the benefit of the policy will decrease in such cases.
- Tax Benefits
A Term Plan with maturity benefits is also known to be one of the best saving options because the premiums which you pay for your policy are exempted from Tax under Section 80C of the Income Tax Act.
The tax benefit which you can leverage with a Term Plan with Return of Premium applies to a maximum limit of Rs. 1.5 lakhs.
- Additional Riders
Just like a Regular Term Plan, you can enhance the coverage of your Term Plan with Return of Premium with the help of additional riders.
It is recommended to opt for riders such as physical disability, personal accident, etc. while purchasing policy to get comprehensive coverage from your insurance right from the beginning of the term plan.
While understanding the benefits of a Return of Premium Term policy over a Regular Term Policy is important, you must also compare plans from different providers to get the best Term Insurance Plan with Return of Premium that suits you perfectly. You can also opt to buy Term Plan with Return of Premium online (also known as e-term plan) to avail additional discounts from policy providers and ensure financial safety for your loved ones.