Return of Premium Insurance Plans

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Everybody loves something extra. An unexpected complimentary chocolate brownie with a cup of cappuccino at the newly opened coffee shop brings a smile on your face. Or that cherry pudding cake served on-the-house after a sumptuous meal at your favourite restaurant enhances your dining experience. This is an inherent psychology among Indians.

But besides the discounts and free offers, companies like to reward the consumer for being associated with it as well. Now imagine, if you found a similar deals in your investment or insurance plans as well. Something like this with your term plan would almost seem impossible. Where you can get your life protected and if you survive the policy term, you get your premiums back.

A basic term plan covers your family against any unwanted situation but doesn't return the premiums. To make term plans as attractive as traditional life-long policies, insurance companies have designed term plans that return the entire premium paid by the policyholder on maturity, if the policyholder survives the term.

Despite the benefit of capital protection, majority of the amount received at the end of the term is taxable in case of traditional policies. Moreover, the cover offered is too meagre as compared to the premiums paid.

Ideally, insurance should not be bought for investment. But those looking for a bigger insurance cover along with capital protection should opt for Return of Premium (ROP) plans. As the name suggests, all the premiums are returned as maturity benefit. This works out for those whoare looking for guaranteed cash value while buying an insurance plan. One can select the term period that match specific needs of the individual.

If you are the only breadwinner in the family, any investment expert would suggest you to buy a pure term insurance plan. But every individual's needs are different. There are multiple reasons that influence the amount of life insurance coverage and the type of plan bought. One can evaluate both the elements keeping few things in mind.

Factors to watch out while buying a term plan
• Annual Income
• LifeStage - whether single or married
• Number of dependents- Kids or parents
• Family members' capacity to handle finances
• Home loan, other liabilities

Insurance is not a one-size-fits-all concept. A basic term plan may not be adequate for everyone. For the return-savvy investor, ROP is a value-for-money policy. You can get customised plan according to your needs, on your own terms.

You can decide on the term as per your financial situation. For instance, you can buy a 30-year term life plan if you have a 30-year loan to pay. If something happens to you during the term, you won't have to worry about the loan. And if you outlive the term, 100% of your premium will come back to you.

Most of the ROP plans come with conversion option and riders. Unlike the normal term plans, you can change the premium term as per your needs. When it comes to cost, premiums may appear on the higher side but sometimes it's worth it to spend more to protect the ones you love the most.

Moreover, returned premiums are not taxable in the hands of the policyholder. So, you get the tax benefit advantage throughout the term in addition to the refunded premiums at maturity*.Most of the insurers limit the age at which you can purchase these plans so it's wiser to make the choice at the earliest to get that extra advantage over normal term plans. It may be difficult to get the ROP option after 50.

So, if you are still in your 30s, it's time your customised plan for a better future ahead. HDFC Life Click 2 Protect 3D Plus offers 9 options to suit your needs. So, get ready and build your own plan for the day you won't be able to plan.

 

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