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A family’s financial security can be in serious jeopardy in unexpected and unfortunate events like its sole breadwinner’s demise. A term life insurance policy safeguards the financial well-being of your family during such times.
People often buy online term plans as they cost less and provide high coverage. However, there is a common confusion as to what happens to the payments you make towards your term insurance policy when the policy term ends.
The two most popular categories of term insurance plans are a pure term insurance policy and a term insurance money-back policy. Let us see how term plans with return of premiums offer your money back at the end of the policy term.
But, before that, let us understand a few basics.
What is a Term Life Insurance Policy
A term insurance plan is the most basic life insurance plan that provides financial coverage to the policyholder’s dependents in the event of his death. It is the purest form of life insurance and is relatively easy-to-understand.
So, do you get money back at the end of the term policy tenure? Well, that depends on the type of term plan you have purchased.
When it comes to maturity benefits of a term insurance plan, there are two types of term life insurance plans:
Pure or regular term insurance plans
Term insurance with return of premium or money-back term insurance plans
What is a Regular Term Plan
A regular term insurance plan offers a pure life cover without any frills or complicated processes. Policyholders pay the premium and receive an extensive life cover in return.
The policyholder’s nominees receive the sum assured if he passes away during the policy term.
This plan does not offer maturity proceeds. If the policyholder survives the term, there are no associated survival benefits, and the term plan simply expires.
What is Term Insurance With Return of Premium?
Considering the demands of Indian customers who were acquainted with money-back insurance plans in India, insurance companies came out with the return of premium (ROP) or the money-back term insurance plan.
Under this plan, the policyholder receives all the premiums paid at the end of the policy term. Some insurers, such as Tata AIA Life Insurance, offer up to 105% of the premiums paid at the end of the policy term to policyholders.
A money-back term insurance plan gives insurance coverage in addition to providing high liquidity through a regular income to a policyholder. The best money-back policy also offers the policyholder a guaranteed* return on investment.
ROP plans are a great investment tool for people concerned about the returns on their investments.
The policy premiums you pay and receive on maturity are tax-free* under Section 10(10D) of the Income Tax Act, subject to prevailing tax guidelines.
The premiums for the ROP plans are higher than regular term plans.
Term insurance with a money-back provision is a non-linked and non-participating policy that promises a survival benefit at the completion of a predefined policy duration.
Do I Get Money Back on Money-Back Term Insurance Plans
Yes; you get the entire premium amount you pay for this policy when the policy matures.
A policyholder can choose the structure of the policy payout. You may get a lump sum at the end of the policy term. Another option is to get regular payouts at fixed intervals based on the policy structure.
Your payouts depend on the plan, its tenure, and the policy premiums.
The returns on the money-back life insurance plan are predetermined, and the policyholder gets the returns he can expect when the policy matures. It saves them from meticulous payout calculations. Moreover, they can plan how to use the funds they get on the plan's maturity.
Getting the Money-Back in the Free-Look Period
Another method of getting the money-back on a term insurance plan is by cancelling it in its free-look period. You can know the details about the free-look period of a policy in the policy document.
A policyholder can cancel the term insurance policy within the free-look period without paying any cancellation charges to the insurer and get the money-back for the premiums paid.
If you are not satisfied with your term insurance policy, you can return it within a period of 15 days (30 days for online term plans) by contacting your insurance provider.
Do Term Insurance Plans have Any Cash Value
A pure term insurance plan does not have a cash value and only offers maturity benefits to the nominee if the policyholder passes away during the policy tenure.
On the other hand, a money-back life insurance plan builds your cash value. As a result, if you terminate the policy before the policy expiry, you get the sum of all premiums paid until then (minus any early termination charges) as benefits.
Enjoy Multiple Benefits With Tata AIA Term Insurance Policies
Tata AIA Life Insurance Policy offers a wide range of term insurance plans with easy payment options and amazing benefits.
Enjoy a whole life cover of up to 100 years with our term life insurance plans.
Increase life coverage at important milestones in life.
Our term insurance plans give you up to 105% return of premium.
Enhance your protection and coverage by adding riders# to your term insurance plan.
Moreover, get tax* benefits as per the prevailing tax laws and multiply your savings.
Conclusion
A term insurance plan can be a regular or a money-back life insurance policy. Under a basic term insurance plan, you do not get money-back at the end of the life insurance term. On the other hand, under a money-back term insurance plan, you get assured returns at the end of the policy term.
