Introduction
Once upon a time, in a world where financial security was of utmost importance, two rivals emerged in the arena of term insurance. The first was a scrappy upstart known as zero-cost term insurance. It promised to protect families without taking a penny from their pockets. The second was a stalwart veteran, the term plan with return of premiums. It promised to not only provide protection but also return the premiums at the end of the term.
As the battle for dominance raged on, people were left wondering which option was better. Some lauded the zero-cost term insurance for its affordability, while others praised the term plan with return of premiums for its dual benefits. The debate continued to rage until, one day, a hero emerged. Armed with knowledge and understanding, this hero set out to uncover the truth about these two rivals and settle the score once and for all.
Dear reader, join us on this journey as we explore the world of term insurance and pit these two rivals against each other. Who will emerge victorious? The answer lies ahead.
Difference between Zero Cost Term Insurance and Term Plan with Return of Premium
You might already know that under regular-term insurance if one dies within the policy tenure, his/her family gets the insured amount. There are no maturity benefits in case of no trigger events.
But, as a prudent individual in your 20s- uncertain of your future financial needs- you want a term plan with survival benefits.
And fortunately, depending on WHEN you'd like your premiums back, there are two types of plans you can check out - Zero-cost term insurance & term insurance with Return of Premiums (TROP).
Suppose you get a term plan of Rs. 1 crore for 40 years. Be it a zero-cost or TROP, both plans will give your family money if you pass away before your policy's tenure.
But, with a zero-cost plan, you get the option of getting your premiums back BEFORE your plan's maturity (excluding GST, obviously).
After a certain time span (depending on your insurer), you'll be given a choice- you can continue your plan or end it & get your money back.
If you're sure that your 'dependents' are financially independent and you're ready to go on that world tour, you can choose the second option. Otherwise, you can move ahead with the first option.
However, a TROP works a little differently- it refunds your premiums AFTER your policy matures (minus GST).
Although this arrangement works well for people who are well-off or do not have any dependents, most usually prefer a zero-cost term policy over it.
This is because TROPS are much more expensive than regular and zero-cost term plans. In fact, a TROP costs almost twice as much as a regular one!
Meanwhile, the zero-cost term plans we recommend come at no extra premium cost.
So, it may be better to go for a zero-cost plan and invest the extra sum (compared to TROPS) someplace else for better long-term returns.
Conclusion
And so, after an intense battle between the zero-cost term insurance and the term plan with return of premiums, we have finally come to a conclusion.
While both options have their advantages and disadvantages, it ultimately comes down to individual needs and preferences. For those who prioritise affordability and simplicity, the zero-cost term insurance may be the way to go. It provides basic protection without added costs. On the other hand, for those who want the added benefit of getting their premiums returned at the end of the term, the term plan with return of premiums may be the better choice.
But what we've learned is that the decision shouldn't be made in haste. It's important to carefully consider your financial goals, budget, and future plans before committing to a term insurance plan. Do your research, read the fine print, and ask questions.
Or...
talk to us at Ditto for a piece of personalised insurance advice and purchase experience for FREE.
Remember, the goal of term insurance is to provide peace of mind and security for your loved ones. Whichever option you choose, make sure it aligns with your values and priorities. And with that, our journey comes to an end. Thank you for joining us in this exploration of zero-cost term insurance versus term plans with return of premiums.
FREQUENTLY ASKED QUESTIONS
Can I customise my coverage with either option and if so, how?
Yes, you can customise your coverage with both zero-cost term insurance and term plans with a return of premiums. You can choose the term length, coverage amount, and riders, such as accidental death benefit, critical illness coverage, or disability coverage.
What happens if I miss a premium payment with either option?
If you miss a premium payment with zero-cost term insurance, your coverage will likely end, and your beneficiaries won't receive any death benefit. With term plans with return of premiums, you may receive a partial refund of premiums paid if you surrender the policy, but you won't receive the full premium amount. It's essential to make timely premium payments to ensure uninterrupted coverage.
Is medical underwriting required for zero-cost term insurance and term plans with return of premiums?
Yes, medical underwriting is typically required for both zero-cost term insurance and term plans with a return of premiums. Insurance companies may require you to undergo a medical examination or provide your medical history to determine your insurability and premium rates.
Are zero-cost term insurance and term plans with return of premiums available for all age groups?
The availability of zero-cost term insurance and term plans with return of premiums may vary by the insurance company and policy terms. Typically, both options are available for individuals aged 18 to 65, but some insurance companies may offer coverage for individuals outside this age range. It's best to check with the insurance company for their specific eligibility criteria.