What is Term Insurance with 100% Refund of Premium at NO COST?
There were 2 types of term insurance plans available in the insurance industry so far. One is a regular term plan also referred to as a “term plan” where if an individual dies during the policy tenure, his/her nominee will receive the life cover amount (Sum assured). And, if they survive the policy term, no maturity amount is paid. The second variant of the term plan is Return of Premium (ROP) in which the policyholder gets back their premium amount minus GST in case of survival till the end of the policy term. However, the Return of Premium(ROP) plans are slightly more expensive than Regular term plans.
While term plans are the cheapest and best form of Life Insurance across the world, it has been seen that there are still people who don’t understand the need for term insurance for themselves and, end up not buying one. This can be either, due to the sense of not getting back any benefit in case of Survival, or feeling that the Return of Premium (ROP) plans are costly. At the same time, it has been seen that most of the customers preferred to take a cover for longer policy term/age due to uncertainty of their retirement age and financial dependency of family members post 60/65 years of age. To cater to this segment of the audience, insurers are now offering a new type of term insurance plan which is commonly referred to as Term insurance with 100% refund of premium at NO COST.
"This plan comes at the same premium as the regular term plan. It has a special exit feature where you can exit at a specific life stage and get all your premiums back whenever you want, during the time period provided by the insurer. So, you get the flexibility of getting a refund of your paid premium amount at the same cost which otherwise might have cost you twice."
How 100% Refund of Premium at No Cost Works?
Let’s understand this with the help of an example:
A 30 year old male, a non-smoker buys a Rs. 1 Crore life cover up to 75 years of age. The monthly premium he will have to pay is Rs. 1,150 per month + GST. The total premium paid will become Rs. 4,34,874 + GST.
Then, at 60 years of age, if he decided to stop his plan. He will get all his premium amount back i.e., Rs. 4,34,874.
Difference Between 100% Refund of Premium at NO COST and Return of Premium Plan
In both ROP and no-cost term plans, you get back/have the option to get back your total premium paid until the end of the policy. To help you understand the two plans better, let us discuss the difference between these two term plan variants:
|Term Insurance with 100% Refund of Premium at NO COST
||Term Return of Premium Plan (TROP)
|100% refund of premium plans are less expensive than ROP
||Return of Premium (ROP) term insurance plans charges a 70-80% higher amount of premium than a regular term insurance plan
|You have the option to choose if you wish to exit the plan early and get the premiums refunded or to continue the plan as it is till the end of the policy term
||Your cover will continue till the end of policy term on premiums being paid and the return of premiums will happen at the end of policy term only. You can’t exit in between and get all the premiums back.
|Suitable for salaried class individuals
||Suitable for self-employed individuals
Should You Buy a 100% Refund of Premium at No Cost Term Insurance Plan or Return of Premium Plan?
Financial advisors always suggest opting for the plain-vanilla term plan. You can buy a term insurance plan with life cover online having low-cost till 70 years of age to meet your insurance needs. Let’s say, at 55 years you have met all your financial responsibilities or have accumulated sufficient funds to meet them, then you can think of discontinuing the term insurance plan by opting for 100% refund of premium at no-cost term insurance plan.
What are the Reasons to Buy 100% Refund of Premium Term Insurance Plans?
Here are a few reasons you should buy the 100% refund of premium at no cost term plan:
These plans are more affordable for customers in comparison to Return of Premium (ROP) plans. Generally, no-cost term plans are about 50% cheaper than ROP plans.
These plans are best suited for customers who are not sure of their retirement age or dependency of family members on their income at an older age.
Which Companies Offer 100% Refund of Premium at No-cost Term Insurance Plans?
Max Life, Bajaj Allianz, ICICI Prudential, and HDFC Life Insurance are among those that have introduced such plans. Let’s discuss the details:
Sample Illustration of 100% Refund of Premium at No Cost Term Insurance Plan
Here are the sample premium rates for a 30-year-old male buying a 1 Crore term insurance till 60 years of age.
||Monthly Premium Rates (including GST)
|Term Insurance with Return of Premium
||100% Refund of Premium at No Cost Term Insurance
|ICICI Pru iProtect Smart
|HDFC Click 2 Protect Super
**premium rates stated above are including GST.
When people reach a specific age, they would have generally accumulated different assets and may not feel the need for term insurance plans. As discussed, various insurers have addressed this need by allowing them to exit the plan at a pre-specified age and get their total premium paid back. It is advisable to buy best term plan after thorough research, comparison, and as per your suitability.