Are Term Plans with Return of Premiums Worth Buying?

Taking care of your loved ones' financial needs should be the financial goal of every responsible adult. Sometimes, life throws us a curveball. It may not go as you have planned it to be. Though you may be fit and healthy today, that doesn't save you or your family from the uncertainties of life.You need to have a financial backup plan that will safeguard your loved ones in your absence. In such situations, insurance policies can protect the financial future of your family. Through term insurance, you can get adequate cover at an affordable premium rate.Over the years, term insurance has evolved a lot. People who seek returns from an insurance policy can now opt for Term Insurance with Return of Premium , one of the subsets of Pure Term Insurance. Although the returns factor in the TROP may compel people to choose the policy, is it worth buying?

• Survival or Maturity Benefit: Term Insurance with Return of Premium option focuses majorly on offering survival or maturity benefit to the insured person if he/she survives through the term. The term period can be 10, 15, 20, or 30 years.
• Refund of Premium: As the name suggests, the policyholder who opts for the TROP variant can avail return of premiums, which he/she has paid over the term period. The insured person gets the entire premium once the policy matures.
• Death benefit: Like a Pure Term Insurance policy, TROP also provides a death benefit, wherein the insured person's nominee gets the sum assured in case the policyholder dies due to an unfortunate event.
• High premiums: Under Term Insurance with Return of Premium, the premium rates are high compared to the regular term insurance plan.
• Paid-up Value: TROP offers a Paid-up value feature, wherein the policy continues to function if you default on the yearly premium payment cycle.
• Add-ons/riders: If you pick the Term insurance with Return of Premium option, insurance companies offer riders over and above the existing cover. These riders include personal accident cover, critical illness cover, and permanent disability cover. Note that you will have to pay an additional premium if you opt for riders.
• Tax benefits: The policy helps to reduce tax liabilities. The premium you pay for the policy makes you eligible to claim tax deductions of up to Rs. 1.5 lakh p.a. under Section 80C of the IT Act.

Considering the points mentioned above, if you plan to buy term insurance with a premium return, the high cost of premium and maturity benefit shouldn't be the only deciding factor. You should choose TROP if you expect returns from a policy in addition to the life coverage for the safety of your loved ones. After all, one shouldn't compromise on one's life insurance needs. In these times of uncertainties, you need to secure the financial needs of your loved ones promptly.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.