You can get money back after term life insurance, but not with all term plans. There are different insurance plans created for various purposes. Some term insurance plans offer only death benefits. In contrast, other term insurance plans allow you to get your premiums back after the policy maturity.Read more
*Tax benefit is subject to changes in tax laws. *Standard T&C Apply
** Discount is offered by the insurance company as approved by IRDAI for the product under File & Use guidelines
So, can you get your money back after term life insurance? If yes, how? Find all the answers in this article.
Many term insurance policies have a money-back option while others do not. Mentioned below are two types of term insurance that you need to know:
There are basic term insurance plans that focus only on the death benefits. Meaning, if a policyholder dies during the policy term, the nominee will receive the sum assured in that case. However, if the policyholder outlives the policy term, no sum assured is given.
Your whole premium for term insurance will cover the insurance cost since there is no cash value. The best part about term plans is the ability to obtain adequate life coverage for your requirements for comparatively low prices. The premiums for young policyholders are lower, and they remain the same till policy maturity.
The premium can be paid monthly, quarterly, or annually depending on your cash flow. You can pay the whole premium in one payment with single premium plans. This eliminates the need to make missed payments or for policy lapse.
The most notable benefit of term plans is the tax deduction of premiums up to 1 lakh 50 thousand Rupees as per Section 80C (ITA, 1961). This benefit decreases your tax stress. For example, a term plan can help you save up to Rs. 46,800 if you are in the 30% tax bracket.
Additional rebates are available as per Section 80D if you choose to add health-related riders. Moreover, death benefits received by your beneficiary are also exempted from tax, subject to Section 10(10D), ITA.
Riders can increase an insured's protection benefits at a minimal cost. These riders protect the insured's family against any possible emergency. Income benefit - This rider will allow the insured to supplement the amount assured by providing a regular income for his/her family.
A term insurance policy that offers a money-back is also known as Term Insurance with a Return of Premium or TROP. As per the name of this policy, here the insurer returns the premiums paid by the policyholder if he/she outlives the policy term.
The important thing about a term plan with money-back guarantees is that the policyholder will receive all premiums paid for the policy in the event he/she survives the policy tenure. This feature is not offered in standard term plans.
Although TROP plans tend to be more expensive than standard term plans, they can still be reasonable than other types of life insurance plans, such as whole life insurance, ULIPs, and endowment plans. It is an excellent choice for someone just starting their career who cannot afford high-end life insurance premiums.
A policyholder can purchase optional riders and add-ons to increase his/her TROP policy coverage. One can obtain coverage for features that are not usually covered by TROP plans with the help of add-ons. However, you will not receive the premium for these riders upon maturity.
TROP is also an insurance plan that can be used to deduct taxes. Section 80C of the IT Act allows for tax deductions on premiums up to Rs.1.5 lakh that are paid in a financial calendar towards a life policy.
Another way to get your money back from your term insurance plan is canceling it within its free-look period.
The policy document comes with information about the free-look period when you purchase any type of insurance policy. During this tenure, you can cancel your insurance policy without any charges and get your money back on your premiums.
You have a minimum of 15 days (or 30 days for electronic policies and policies issued through distance mode) to review the terms and conditions of the policy and return it if you are not satisfied. You can find the details of your policy’s free-look provision in your policy wordings.
You can cancel your policy at any time during the free look period. You will need to contact the insurer to cancel your insurance.
Whether you will get money back after term life insurance depends on your life priorities and the term plan you have chosen. Consider opting for a basic term insurance plan if life cover is your priority. However, a TROP plan is ideal if you wish to get your money back after term life insurance.
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