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Is return of premium life insurance worth it?

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Is return of premium life insurance worth it?
April 09, 2019
For the obvious reasons of financial security and monetary-reserve building, life insurance serves as an effective instrument. In fact, it is one of the primary sources of futuristic financial security and as such, is mandatory for any kind of a financial portfolio. A life insurance plan ensures that there is sufficient financial security in place for your loved ones, even in your absence. A traditional life insurance policy offers guaranteed plan benefits i.e. the sum assured to the nominee(s) of the policy holder in the event of the policy holder's demise during the policy term. This means a guaranteed income for the family members of the policy holder in her/his absence and therefore, a life insurance policy is the basic requirement of any financial portfolio. However, it is important to understand the basic difference between a traditional life insurance policy and a traditional term insurance policy. A term insurance plan entitles the policy holder's nominee(s) to receive the sum assured in the form of death benefit in the event of the policy holder's demise during the policy term. However, in case the policy holder survives the policy term, there are no maturity proceeds. In case of a traditional life insurance plan, maturity proceeds are given to the policy holder in case she/he survives the policy term.

Owing to customer-engagement and innovative modes of insurance, these days various insurance providers offer a return-of-premium option with the traditional term insurance plans. The plans that come with these options usually charge a higher rate of premium than the traditional term insurance plans. In simple language, return of premium option entitles the policy holder to receive the entire amount that she/he has paid as premiums during the term of the policy, upon maturity of the policy term. This means that the premiums paid by the policy holder are paid back by the insurance provider to the policy holder, in the event of policy holder's survival of the plan term. Needless to say that such an option may sound to be completely beneficial over a period of time. There are added features as well. A return of premium or ROP term insurance plan functions as an investment of sorts. This is because the returns are guaranteed after the plan maturity and thus, the invested amount can be treated as a return.

A general ROP term plan may seem to be a guaranteed-return based plan depending on the risk-appetite of the policy holder. The factor of risk counts because, unlike investment in any market-linked instrument or fund  option, an ROP term insurance offers non-risk evaluated benefits that are guaranteed. This makes the ROP an ideal option for those who wish to have decided and pre-fixed benefits in return of a higher amount of monthly or periodic premiums. It must be kept in mind however, that the payable premiums have a direct impact on your pocket and therefore, an ROP term plan must be chosen only in case if the higher premiums suit your requirements.

HDFC Life offers various term insurance plans that seek to secure your finances in the event of any unforeseen circumstances and are meant for your total financial security at all times.

 

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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