Insurance plan

Can a term insurance plan help you save?

It’s a universally recognized truth that term insurance plans can help financially secure the future of your family and loved ones. This is possible thanks to the higher amount of death benefit that the insurer insures and the low premiums that it offers are an icing on the cake. However, since there are no maturity benefits, most people view these plans as basic financial coverage for their family and children in the event of an unfortunate death. Still, there may be instances where a term plan can help build a basic savings for the future. Read on to find out more.

What is term insurance?

Pure Term insurance plans offer basic coverage, that is, life insurance coverage for a prefixed term with no benefits or returns at maturity. Therefore, you pay the premiums for the life cover for a fixed term. In the event of an unfortunate death during this insurance period, a lump sum death benefit is paid to your family members. However, if you survive the term of the policy, there is no real return. To deal with this, many insurers offer a temporary plan with premium refund.

What is a term plan with refund of premium?

Many term insurance plans have a premium refund feature. You can use a term plan calculator to calculate your total premiums. Like a standard term plan, these plans pay out the prefixed death benefit to the policyholder’s agent(s) in the event of death during the term of the policy.

However, assume that the insured life survives the term of the policy. In this case, the full amount of premiums they paid is refunded after deducting premiums added to the underwriting, GST and premium amounts paid to endorsements for the policy at the end of the term. This basically means that whatever you pay in premiums will be refunded to you (with some deductions) at the end of the policy term if you survive the same.

Can it help you build your savings?

Term insurance plans that offer the return of premium benefit can help you build a basic savings since you can get the full premium paid with minimal deductions after you complete the term of the policy. This money you pay will come back to you at a crucial time in your life (if the end of your term coincides with your retirement, as it ideally should) and can be a welcome financial gain. For example, suppose you have a plan with life coverage of 50 lakes with an annual bonus of 20,000. Here, in the event of death during the term of the 30-year policy, the amount of 50 lacs will be donated to your family.

On the other hand, if you survive to the end of the policy term, you will get back the full amount of the premium paid, i.e. 20,000 x 30 = 6,00,000 as a lump sum after deduction of GST and other applicable charges. This amount can be useful to help you meet various expenses in the future. Although, since the premiums for term plans are lower, the lump sum payment at the end of the policy term will be a small amount, and you must have other investments, savings plans, or retirement plans in place. place to support yourself and your family in retirement.

Are there other benefits of premium return term plans?

The advantages of these schemes can be summarized as follows:

  • This is a lump sum benefit through the refund of premiums paid at maturity. You and your family get the full amount of the premium invested during the term of the policy. This will be returned to you with some basic deductions for GST and administrative costs.
  • The policy continues even when the policyholder misses premium payments due to financial problems. However, the benefits of the policy are reduced accordingly. This means that you continue to have coverage despite not paying premiums due to loss of income or other reasons. Note that for this feature to take effect, you must pay premiums for at least three years after purchasing the policy.
  • Family life cover by the payment of the death benefit to the family of the insured person in the event of death during the term of the contract. This makes these plans a good option for savings and life coverage.
  • Similar to a standard term plan, you can get deductions of up to 150,000 under Section 80 Subsection C of the Income Tax Act 1961. Death and Maturity Benefits from the policy are also exempt from tax under the Income Tax Act 1961. article 10, subsection D.
  • If the policyholder redeems such a policy, the cover will be terminated. However, they can recover part of the premiums paid so far according to the terms and conditions of the policy.

As can be seen, premium return term insurance policies are not just investments for life coverage, but can also be used to build up future savings in a disciplined manner.

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