What will happen if you pay premium for a life insurance plan for a long period, say 10 years, and then decide to discontinue it after you feel that you do not need it anymore? In usual circumstances, you will lose out on premium already paid, but a new category of term plans has been introduced where all the insurance premiums already paid are returned to the policyholder.
These term policies are referred to as ‘zero cost’ term plans. Under this category, the policyholder is given a liberty to discontinue the policy at a life stage when they feel they don't need it any more for a variety of reasons.
Interestingly, the customer will still be entitled to receive the premium that they paid but after deducting the GST (goods and services tax).
As of now, only a couple of insurers have rolled out these term insurance plans but many more are set to launch them in the near future.
The data suggests that a majority of policyholders choose term plans which give them protection up to 70 years of age since they want to ensure their family remains secure. So, this zero cost term plans could come handy for such policyholders who would not have any dependants on them
Existing categories
In term plans, there are two categories as of now. The first one is a regular term plan while the other is TROP (Term Return of Premium). Under the regular plan, a policyholder is meant to pay a premium up to a certain time period and if they die during that period, the policy amount is given to their family or beneficiaries. On the other hand, in TROP plan, policyholders stand to get death benefit as well.
“This implies they will get all the premiums back if they survive the policy term. These plans are sold for a higher premium, i.e., 1.8 times or 2 times of a regular term plan. There is a new category of plan in which you have the choice to continue the plan till the time you want. Here, you can inform the insurer to shut down your plan when you don't have liabilities anymore or around retirement time, and the insurer will return all your premiums paid,” said Sajja Praveen Chowdary, Head Term Life Insurance, Policybazaar.com.
“The idea is to build a category of term plans for the customers who are still not investing in term insurance. In fact, term insurance is the cheapest form of insurance, and everyone should invest in it. With such plans introduced by insurers like Max Life, Bajaj and others, it will become even more affordable for customers to opt for it,” he said.
