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The secret to a long and eventful life is to live in the presence of family and friends. To prolong our happiness, we invest not only in healthier lifestyle choices but also in instruments that can provide long-term financial security. While exercising daily and following a well-rounded diet plan help keep the physical health in peak condition, financial instruments such as Term Plan with Return of Premium provide a robust financial safety net against life's uncertainties.
If you are wondering about what is term plan with return of premium and its benefits, here is a breakdown of different features and benefits of Max Life’s Term Plan with Return of Premium (Max Life Smart Term Plan – UIN: 104N113V04) (upon policyholder’s selection of Premium Back Variant this product shall be a Non-Linked Non-Participating Individual Life Insurance Savings Plan).
What is a Term Plan with Return of Premium?
As the name suggests, Term Plan with Return of Premium is essentially a term life insurance policy, which offers long term financial security against accidental injuries, life-threatening ailments, and other emergencies. Max Life’s Term Plan with return of premium option can also provide a comprehensive protection against financial instability across all walks of life, with benefits such as –
1) Waiver of premium benefit
2) Accidental death benefit
3) Protection against critical illnesses
4) Tax-saving benefits
However, an essential benefit of a term plan with return of premium is the survival benefit, payable at the end of the policy term. The return of premium plans works the same as any other standard term insurance plan. Still, with one difference – they offer to pay back the total amount of annualized premium paid in case you survive the policy tenure.
To understand Max Life Term Plan with Return of Premium, here is an illustration – Mr Gupta is a 35-year old business-man, a non-smoker, and has an annual income of Rs. 10 lakhs. He opts for Max Life Smart Term Plan (A Non Linked Non Participating Individual Pure Risk Premium Life Insurance Plan, UIN - 104N113V04); whose details are below:
- Sum Assured - Rs 1 crore
- Premium Payable - Rs 16,756 per annum (inclusive GST)*
- Policy Term - 40 years
- Premium Payment Term – 40 years
In the case of his demise within the policy period, his nominee would receive the Sum Assured of Rs 1 crore. However, if Mr Gupta survives the policy tenure of 40 years and had taken Max Life Smart Term Plan with Return of Premium (upon policyholder’s selection of Premium Back Variant this product shall be a Non-Linked Non-Participating Individual Life Insurance Savings Plan) (by paying Rs. 9,474 additional per annum), he will receive the sum of premiums paid for 40 years exclusive of taxes on Maturity.
Note: The total premiums returned (exclusive of GST) are only for the base policy and not for any additional benefit or riders opted.
In the case of his demise within the policy period, his nominee would receive the Sum Assured of Rs 1 crore. However, if Mr Gupta survives the policy tenure of 40 years and had taken Max Life Smart Term Plan with Return of Premium (upon policyholder’s selection of Premium Back Variant this product shall be a Non-Linked Non-Participating Individual Life Insurance Savings Plan) (by paying Rs. 9,474 additional per annum), he will receive the sum of premiums paid for 40 years exclusive of taxes on Maturity.
Note: The total premiums returned (exclusive of GST) are only for the base policy and not for any additional benefit or riders opted.
*Source: Max Life Insurance Term Plan Calculator
What are the Benefits of Max Life’s Term Plan with Return of Premium?
Benefits of Max Life’s Term Plan with Return of Premium include the following:
1) Survival Benefit
Contrary to a pure term insurance plan which offers only life cover, a term plan with return of premium also offers survival benefits. Thus, if you (as the life insured) were to outlive the policy period, you are eligible to receive all the annualized premiums paid towards the policy. Max Life’s Term Plan with Return of Premium is ideal for individuals who look for some kind of return from their term policy on policy maturity.
2) ROP Benefit with MWPA
With Max Life’s Term Plan with Return of Premium under MWPA, you can nominate your wife and children as beneficiaries, entitling them to both the sum assured and the survival benefits (refund of premiums paid).
3) ROP Option and Surrender Value
When you purchase a term plan with return of premium (ROP) option and decide to discontinue paying the premium under the plan or surrender your policy, you will receive a Surrender Value of the policy. You can only surrender your policy subject to following criteria:
- Single Premium Variant: After payment of single premium
- Limited Pay variant and Regular Pay variant: On payment of two full years’ premium
The surrender value is higher of Guaranteed Surrender Value (GSV) or Special Surrender Value (SSV). The Special Surrender Value is equal to the Guaranteed Surrender Value under this variant.
4)Tax Benefits
Investing in Max Life’s Term Plan with Return of Premium also provides you with the opportunity to reduce your tax liabilities. The premiums paid towards the term plan with return of premium are eligible for tax deductions under Section 80C of the Income Tax Act, 1961. Thus, you can save up to Rs. 1.5 lakh worth of term insurance premium per annum. Moreover, the term life insurance payouts are tax-exempt under Section 10 (10D) of the Act.
4)Tax Benefits
Investing in Max Life’s Term Plan with Return of Premium also provides you with the opportunity to reduce your tax liabilities. The premiums paid towards the term plan with return of premium are eligible for tax deductions under Section 80C of the Income Tax Act, 1961. Thus, you can save up to Rs. 1.5 lakh worth of term insurance premium per annum. Moreover, the term life insurance payouts are tax-exempt under Section 10 (10D) of the Act.
What are the Features of Max Life’s Term Plan with Return of Premium?
Max Life’s Term Plan with Return of Premium offers the following features:
a) Multiple modes of premium payment, including:
- Single Pay
- Regular Pay (premium paid on either annually, half-yearly, quarterly, or monthly basis – throughout the policy period)
- Limited Pay (premium paid for a fixed number of years lesser than the Policy Tenure)
b) Multiple channels for a seamless buying experience
c) Quick and Hassle-free insurance buying and claim settlement experience – without any bulky paperwork
Multiple premium payment channels, including:
- Net banking
- Digital wallets
- Credit cards
- Debit cards
b) Multiple channels for a seamless buying experience
c) Quick and Hassle-free insurance buying and claim settlement experience – without any bulky paperwork
Multiple premium payment channels, including:
- Net banking
- Digital wallets
- Credit cards
- Debit cards
How to Buy Term Plan with Return of Premium?
Here is how you must proceed while purchasing a Term Plan with Return of Premium:
1. Assess the required sum assured by factoring-in your existing liabilities and future financial needs
2. Use an online term plan calculator to determine the premium payable based on your selected return of premium plan coverage
3. Compare different return of premium plans available online to select the one that offers maximum benefits at a cost-effective premium payable
4. Go with an insurance company with a streamlined claim settlement process and a high claim settlement ratio (CSR)
5. Choose the highest policy tenure available under these return of premium plans on offer – the term insurance policy term cannot be extended later
6. Review and opt for the available rider options with the return of premium plans
7. Do not avoid disclosing any lifestyle habits and pre-existing health issues at the time of purchasing the return of premium plan
8. Make sure that you choose a frequency of premium payments that suits your financial disposition – if you are comfortable paying the premium once a year, it is better to go for annual premium payment frequency
9. Purchase Term Plan with Return of Premium (Max Life Smart Term Plan – UIN: 104N113V04) (upon policyholder’s selection of Premium Back Variant this product shall be a Non-Linked Non-Participating Individual Life Insurance Savings Plan) after thorough research, so that you may not have to switch or surrender your policy later.
FAQs About Term Plan with Return of Premium
Q. How Much Term Plan with Return of Premium Should You Buy?
A. While researching about different term plan with return of premium, you may come across descriptions that say that you must go for the maximum sum assured offered under the policy. However, you must not do so. Instead, you must choose a sum assured value that is large enough to cover your existing liabilities and financial goals.
It is advisable that you take a term life cover of at least 15-20 times of your existing annual income. However, the fact is that your cover needs to be large enough to account for your current and future liabilities and your financial goals.
Q. If I am a smoker, will it affect the term plan with return of premium plan premium?
A. The premium payable under all types of life insurance policies, including term plan with return of premium, usually vary from a smoker to a non-smoker. If you are a smoker, you will have to pay a higher premium than a non-smoker, for the similar insurance coverage, because smokers come under the high-risk category.
Q. For How Long Should I Purchase a Term Plan with Return of Premium?
A. The duration of your term policy, including the return of premium plan, should be determined based on how long you wish to provide financial security to your loved ones. It is advisable that you opt for a coverage term at least till your retirement age. Thus, if your current age is, say 35 years and you are planning to retire at 60 years of age, then you should at least choose a 25 years policy term.
Q. What are the maturity benefits of a term plan with return of plan?
A. Maturity benefits of a term plan with return of premium comprise the total amount of annualized premiums paid towards the plan (excluding taxes), which are returned to you, upon surviving the policy tenure. In other words, apart from offering the different benefits of a plain-vanilla term plan, the return of premium plan refunds the entire amount of annualized premium you have paid, if you survive the policy coverage period.
ARN: Jan21/Bg/14C