Here’s How Risk-Averse Investors Can Purchase Term Insurance
A wise man once stated: Price is what you pay, a value is what you get!” That wise man? Warren Buffett – an investment expert who basically knows everything about investing.
The saying above not just applies to investments. It could easily be applied when shopping for term insurance. Of course, you want to get good value — your term plan should provide adequate financial security for your dear ones in your absence. But, if you are a risk-averse investor, you would have second thoughts about making premium payment without being assured of any returns, should you outlive the policy tenure.
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So how do risk-averse investors go about investing money in term insurance? Read on to know better:
An Alternative Option for Risk-Averse Investors?
Despite financial experts tirelessly admiring the virtues of pure term insurance, a vast majority of policy seekers remain unconvinced about having to shell out premiums without any assured benefits. This perception contributed to the popularity of endowment plans. However, policyholders realised that in this bargain, they might have to settle for an inadequate life cover.
Therefore, for risk-averse investors, who seek the middle ground between the two options, insurers like Future Generali have come up with term plan with return of premium option (TROP plan). This plan works in an advantageous way for those who expect to get returns from their insurance plan.
How Does This Plan Work?
A return of premium term plan offers death benefit in the event of the insured’s demise during the policy term. However, unlike a simple term plan, it gives you your money back if you survive the policy term.
Thus, you get back the amount you pay as premiums at the end of the policy term.A guarantee like this makes it easier to give your dear ones the financial protection they need. And as every single penny is returned, it acts as a win-win solution for you!
Consider a term plan with return of premium option that provides coverage for 15 years and is worth Rs.50 lakhs. The annual premium for this plan is Rs. 4000. In case of insured’s demise, his nominee will be paid Rs. 50 lakhs (sum assured). But, if the insured survives the term, the insurance company will return him the entire premium amount Rs. 60,000 (Rs. 4000×15)
A TROP plan is designed for risk-averse investors. It pays a full cover to the dependents if something unfortunate happens to the insured, just like a regular term plan. And if the insured outlives the term,his premiums are returned. Apart from covering the death risk, this plan presents the following benefits:
- It offers flexible premium payment optionsmonthly, quarterly, half-yearly and annually
- The premium refund is tax-free
- It allows you to choose the term that makes the most sense for your situation
- Optional riders are also available at meagre additional cost
- Section 80C permits you to avail tax benefits for the premium paid against your term plan with return of premium option
Tips to Choose the Right TROP Plan
While purchasing this plan is a brilliant investment, there are certain things you must consider before buying one:
- When determining the cover amount, think about your life stage and number of dependents
- Consider your future obligations before finalising the cover amount
- Look for a policy tenure that can cover your loved ones for the longer period
- Do some comparison shopping
- Go for an insurer with a claim settlement ratio of 95 percent or more
A return of premium term plan can be a great way to make sure you have financial security in place for your loved ones in the event the worst happens and can also fund a good windfall if everything goes well and you outlive the policy.
So, now that you know about a plan that can provide you with everything that was missing from the traditional term plan, why wait to purchase it?
by Sanya Uppal