Why to Choose Basic Term Plans Over Return-Of-Premium Plans?

A term plan can be thought of as a safety vault for your family's security, offering comprehensive coverage that doesn't strain your budget. What's even better is its flexibility, allowing you to tailor the plan to meet your family's specific needs in your absence.
However, under regular term plans, if you outlive the policy term, you receive no benefits. This feature of lack of returns might deter you from choosing this plan. And this is where the term plan with return of premium option comes into play. This policy combines insurance protection with monetary returns if you make it through the policy period. It's a way to make sure you don't feel like your hard-earned money has simply vanished into thin air.
But, even with this enticing offer, basic term plans prove to be the wiser choice. Why? Let's find out.

What is Basic Term Insurance?

Term insurance is a type of life insurance that ensures your family receives a fixed sum of money if you unfortunately pass away during the policy's term. The primary goal of buying a term insurance plan is to provide robust financial protection for your dependents in your absence. This plan is particularly essential if you have not had the opportunity to amass sufficient wealth to ensure a comfortable livelihood for them in the face of uncertainty.

How Does It Work?

You pay a set premium for a specific period in exchange for financial protection. If, unfortunately, you pass away while the policy is in effect, the insurance company will step in to provide a sum of money to your chosen nominee. This money, referred to as the ‘sum assured’, serves as a replacement for your income. This money can serve as a beacon of hope, enabling your loved ones to maintain their existing lifestyle and turn their dreams into reality in your absence. Your family will receive this financial assistance depending on the claim payout option you selected when you purchased the policy.

What Is A Return-Of-Premium Plan? How Does It Work?

Term insurance with return of premium plan is a type of term insurance plan.

The return-of-premium policy offers a dual benefit. In the unfortunate event of your passing during the policy term, your family will receive a death benefit. On the other hand, if you outlive the policy term, you receive a maturity benefit. The maturity benefit essentially is a refund of the premiums you've paid throughout the policy duration. It's important to note that the return-of-premium option can only be added at the time of purchasing the policy and not at a later stage.

What is typically refunded to you?

• Base plan premiums are paid during the policy term.
• Additional underwriting premiums - Extra premiums as requested by the insurer based on factors like medical reports, health, habits, etc. These are usually returned, but some insurers may not refund these extra premiums.
• Modal loading premiums - Extra premiums charged when you opt to pay your premiums monthly, quarterly, or half-yearly instead of annually. These are usually returned.

What is typically not refunded to you?

• Rider premiums are generally not returned. However, some insurers may refund rider premiums.
• Any taxes applied to the premiums you have paid.

It's important to remember that the terms and conditions may vary depending on the specific insurance plan you choose.

Why Should You Choose Basic Term Plans Over Return-Of-Premium Plans?

Here are some of the reasons why buying a term plan is a wise decision -

1. Simple And Easy To Manage
   Basic term insurance plans are straightforward, with no hidden complexities, making them a hassle-free choice for both purchase and management. On the other hand, return of premium plans are a blend of insurance and savings elements. This combination can add a layer of complexity, making it hard to grasp the plan's full scope and intricacies.
2. Cost-Effective
   When it comes to cost, basic term insurance plans are the budget-friendly choice compared to return-of-premium plans because they offer pure life insurance coverage without any savings or investment components. On the flip side, return-of-premium plans include a combination of insurance and a savings element, making them more expensive. So, if you're seeking a cost-effective option to protect your loved ones, a basic term plan is the most economical route to take.
3. Fulfils Its Core Purpose
   At its core, term insurance is about ensuring your family's financial security if something happens to you. This is where basic term plans really stand out, offering a death benefit without any additional frills. On the other hand, return-of-premium plans, though they do provide the death benefit, come with an additional feature. They refund the premiums you've paid if you outlive the policy term. While this might appear enticing, it often comes at a high cost, and it often comes at a higher price, making it a less efficient investment. So, if your main goal is to secure your family's financial future, the straightforward approach of a basic term plan is often the more prudent choice.
4. Highly Efficient
   Term return of premium plans are often promoted as a means to recover your premium payments if you outlive the policy term. However, the amount you receive is usually less than what you could potentially earn through other investment avenues. When you choose a basic term plan and invest the extra money you save into more promising financial opportunities, you open the door to the potential for greater returns.
5. Greater Flexibility
   Basic term plans offer a high degree of flexibility, enabling you to customise the coverage amount and policy term to align with your specific requirements. In contrast, return-of-premium plans often have rigid terms and limited flexibility, making it harder to tailor the policy to suit your specific financial situation. Further, Return-of-premium plans often come with a number of restrictions. Many insurance companies, for instance, do not permit early exit options, which would allow you to terminate the plan while it's still in effect. On the flip side, basic term plans don't have these restrictions, granting you more freedom and control over your coverage.

Looking For Term Plans? Here You Go!

1. ABSLI Anmol Suraksha Kawach [UIN: 109N139V01]
   ABSLI Anmol Suraksha Kawach [UIN: 109N139V01] is a cost-effective and simple term insurance plan designed to cater to your short-term protection needs. Life's unpredictability underscores the need to prioritise the financial security of your family, particularly when you are the breadwinner of the family. This plan offers life insurance coverage and protection benefits to shield your loved ones from potential financial hardships in your absence. Some of the key features include – life cover of up to 5 years, flexible payment (single pay/regular pay), tax benefits, etc.

2. ABSLI Poorna Suraksha Kawach[UIN: 109N138V03]
   ABSLI Poorna Suraksha Kawach [UIN: 109N138V02] is a comprehensive protection solution explicitly crafted to meet your financial needs and ensure your family's future in the face of life's uncertainties. It offers a range of plan options to suit your preferences. The key features of ABSLI Poorna Suraksha Kawach include multiple plan options, inbuilt terminal illness benefit, accelerated critical illness benefit covering 42 listed critical illnesses, an option to avail of a 'One-time exit value' for emergency situation, etc.

3. ABSLI DigiShield Plan [UIN:109N108V10]
   ABSLI DigiShield Plan term insurance offers financial security at various life stages, whether you're a parent, newly married, a young individual, or managing a home loan. It includes versatile features, including limited pay (accelerated premium payments), sum assured reduction (decreasing cover), whole life coverage up to 100 years of age, and riders such as the Critical Illness Rider and Accidental Death Benefit Rider, etc.

Wrapping up!

Basic term plans are a simple, cost-effective way to ensure your family's financial security in the event of your untimely demise. They offer a straightforward, hassle-free approach, allowing you to customise coverage to meet your unique needs. On the other hand, return-of-premium plans do provide a refund of your premiums if you outlive the policy term, but they often come at a higher cost and offer less flexibility. The returned premium may not match the potential earnings from alternative investment opportunities. Ultimately, if your primary objective is to secure your family's financial future, basic term plans are a prudent choice.

Product Disclaimer

ABSLI Anmol Suraksha Kawach[UIN: 109N139V01] is a Non-Linked Non-Participating Individual, Life, Pure Risk Premium Term Insurance Plan.

ABSLI Poorna Suraksha Kawach[UIN: 109N138V03] is a non-linked non-participating individual pure risk premium life insurance plan.

ABSLI DigiShield Plan [UIN:109N108V11] is a Non-Linked Non-Participating Individual, Life, Pure Risk Premium Term Insurance Plan.