Is it worth investing on Return of Premium rider?
These days the market is full of insurance products. Different insurance companies offer a variety of products. However, of course, it is necessary to analyse each and every aspect before buying any life insurance policy.
One of the most affordable forms of life insurance is Term Life Insurance. It provides death benefit in case of policyholder dies within the policy term. But, if the insured person outlives the tenure of the policy, then he or she loses the premiums paid, and there is no maturity benefit as well. As Term Life Insurance is a pure protection plan, it is designed in such a way that it covers you for a fixed period of years and give your family a substantial coverage amounts in case of your sudden demise during the policy.
A return of premium rider is one such term life insurance rider which refunds your premiums if you survive the policy term. Sounds interesting, right! But its more expensive than the regular ones. After the policy gets matured or if the policyholder survives the policy then typically, they get all the premiums. Let’s take an example – supposedly you have bought term insurance worth Rs 60 lakhs for 30 years, and your premium is Rs 5000. If you passed away within the policy duration, then the beneficiaries will receive the death amount of Rs 60 lakhs, but in case you survive the policy term then you will get Rs 1.5 lakh that is Rs 5000 X 30 (years).
But is it really worth investing? To have the answer let’s look into its pros and cons.
- In case you survive your policy term, all the premiums you paid towards your policy will be returned to you.
- The money that is returned to is tax-free.
- Term insurance with return on the premium rider is expensive. You might have to pay 2 – 3 times more than your regular policy in case of adding this term insurance rider to your policy. For example, a 30-year-old individual buys a term policy worth Rs 1 crore for a term of 25 years will cost around Rs 10,000. Whereas in case return of premium rider, the same term policy will cost around Rs 20,000 to 30,000 more, which is quite expensive.
- The money returned to you will be without any interest.
- If by any chance you cancel the policy before its term gets over, then you might not receive any of the premiums paid.
Well, it’s entirely depends on personal preferences and financial condition. Getting a refund of your money is great that too without any tax deduction but the premiums that you have to pay will be on the higher side, which might hurt your pocket and does not fit in your budget. Again, tax-free money back still sounds exciting, but you have to remember that it is not the extra money, it’s the same money that had paid before. If you are looking to increase your savings for retirement purpose, then it will be better that you invest your money in some high-yielding investment option.
If you can afford expensive premiums and want life insurance that offers maturity benefit as well as a death benefit, then a return of premium can work for you. Also, it is ideal for those who think paying for such life insurance that does pay you back is a waste.
The bottom line is a return of premium rider sounds great, but the intricacies around it might prevent it from being a must-have. Before purchasing any term plan, you must analyse your current and future scenarios to make sure that the policy you are buying will be fruitful for your family in the long run. You must inspect every possible circumstance to provide financial freedom to your loved ones in case of any adverse situation. And for this, you must carefully research about the term life insurance rider that you want to opt for along with your base policy. You can visit BimaKaro.in to explore options regarding different term plans, get customised quotes for them, compare and then buy.
Term Insurance does provide peace of mind which is quite rare these days. Life is getting busier, and we all are getting lost within it, and in this chaos, a term insurance plan gives the financial assurance to our loved ones in our absence.