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Term Insurance With Money Back – Yes, It Is Possible

 

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Written ByPalak Bagadia
AboutPalak Bagadia
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Palak Bagadia, Associate – Digital Marketing at Bajaj Allianz Life, with experience spanning content and performance marketing, recruitment, employee engagement in the BFSI industry.
Reviewed ByRituraj Singh
AboutRituraj Singh
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Rituraj Singh,With over 6.5 years of experience in the insurance industry, Rituraj Singh, Manager- Product & Brand Marketing at Bajaj Allianz Life Insurance overlooks new product launches, compliance, and brand projects, leveraging artificial intelligence and technology to enhance outcomes.
Written on: 7th July 2024
Modified on: 7th July 2024
Reading Time: 15 Mins
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What is term insurance?

 

Term insurance is the purest form of life insurance. It is essentially a type of a life insurance policy that provides the nominees or beneficiaries a death benefit in the event of the policyholder’s demise. In exchange for the life insurance cover, the policyholder is required to make regular payments known as "premiums" to the insurance company.

Unlike other types of life insurance plans, the pay-out in a term insurance is only made in the case of the policyholder’s death during the policy term and not upon the term policy’s maturity if the holder survives the tenure. It is primarily for this reason that the premiums charged for term insurance is always lower than the other types of life insurance.

However, now you can also buy term insurance plans that provide a return of premium on maturity, which means you will receive the money you have paid in your term insurance policy if you live the term of the policy.

 

What is the money back policy?

 

Now that you have the answer to the question "What is term insurance?" let us take a quick look at what the return of premium/money back feature is.

As you have already seen above, a term insurance is a life insurance policy. Since the policyholder is not liable to receive any maturity benefits if he survives until the end of the policy term, the premiums that he pays during the tenure of the policy is essentially forfeited and is not returned to him (excluding taxes on premiums). However if there is a sudden demise of the policyholder during the policy term, the nominee stands to receive the term insurance benefits.

On the other hand, there is a variation of a term policy where the insurance company returns the premiums paid throughout the tenure of the policy back to the policyholder. This is known as a term insurance plan with return of premium. These premiums (excluding taxes), which is paid throughout the tenure, is returned if the policyholder survives until the end of the policy term.

In the event of his death during the policy tenure, the beneficiaries of the policyholder would be eligible for a death benefit in accordance with the conditions of the term policy. Such a policy is also known as term insurance with money back or a term return of premium (TROP) plan.

 

How does term insurance with a return of premium work?

 

Here is a brief look at how term insurance with return of premium works -

Let us assume that Mr. Rakesh is in the market for a term policy. He purchases a term insurance with the money back option, which provides a life insurance cover of around Rs. 50 lakhs. The total tenure of the term policy is 20 years. In exchange for the life cover, he is required to pay an amount of Rs. 10,000 per annum (exclusive of the taxes) for the entire term of 20 years. In this case, one of two things are likely to happen. Let us visit each scenario one after the other -

Scenario 1: Mr. Rakesh dies during the policy term

In this scenario, the nominees or the beneficiaries of Mr. Rakesh would receive the sum of Rs. 50 lakhs as a death benefit from the insurance company.

Scenario 2: Mr. Rakesh survives until the end of the policy term

In such a situation, Mr. Rakesh would get back the premium that he paid throughout the entire tenure of the policy, which comes up to Rs. 2,00,000 (Rs. 10,000 x 20 years).

 

Benefits of TROP

 

Term insurance with money back option comes with a whole host of benefits to the policyholder. Here is a quick glimpse of some of the advantages –

1. Guaranteed return of premiums

With regular term insurance plans, the policyholder does not receive any maturity benefits. However, with TROP plans, they get to enjoy a maturity benefit by way of getting their premiums back.

2. Tax benefits

The premium that the policyholder gets back at the end of a TROP plan is completely exempted from taxation under section 10(10D) of the Income Tax Act, 1961, subject to the provisions stated therein. This is in addition to the tax deduction of Rs. 1,50,000 that he gets to enjoy on the premiums paid towards the term policy according to section 80C of the Income Tax Act, 1961.

3. Surrender value

In the event where the policyholder surrenders a TROP plan, he is liable to get back a portion of the premiums paid by him if the policy has acquired any surrender value at the time of surrender, subject to policy terms and conditions.

 

Conclusion

 

A term insurance with a money back option is a good option for individuals, since it provides a lot of value to the policyholder. With TROP plans, the policyholder gets to enjoy a guaranteed return of the premiums that he paid. This reduces the financial burden significantly, which in turn gives the holder some much-needed peace of mind.

If you opt for a term plan with a return of premium option, make sure you pay your premiums regularly. That way, you will continue to enjoy the life cover, and in case you survive the policy term, all the premiums you paid will be returned, so you can count on that lump sum inflow of funds at the end of the tenure.

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Disclaimers:
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~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information. 

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Disclaimer

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

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Terms & Conditions

I hereby authorize Bajaj Allianz Life Insurance Co. Ltd. to call me on the contact number made available by me on the website with a specific request to call back. I further declare that, irrespective of my contact number being registered on National Customer Preference Register (NCPR) or on National Do Not Call Registry (NDNC), any call made, SMS or WhatsApp sent in response to my request shall not be construed as an Unsolicited Commercial Communication even though the content of the call may be for the purposes of explaining various insurance products and services or solicitation and procurement of insurance business

 

Please refer to BALIC Privacy Policy

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Disclaimer

%%Above illustration is for Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V03) considering Male aged 25 years | Non-Smoker | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 1,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 6,238. 2nd Year onwards premium is Rs. 6,659. Total Premium Paid is Rs. 1,99,349 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly installments (Lumpsum Payout Percentage : 45, Income Payout Percentage : 55) | Premium shown above is exclusive of Goods & Service Tax/any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. This is inclusive of all the discounts mentioned above.

##Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

@Term Insurance plan bought online directly from Bajaj Allianz Life Insurance has no commissions involved.

^^The Return of Premium amount is total of all the premiums received, exclusive of extra premium, rider premium and GST & /any other applicable tax levied, subject to changes in tax laws
Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

X
Disclaimer

Bajaj Allianz Life eTouch- A Non Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N172V04)

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy.Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

~Individual Death Claim Settlement Ratio for FY 2023-2024

1Premium Holiday has to be selected at inception to avail this benefit and also depends on other policy terms & conditions


Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116


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Life Cover + 16% Discount** +Save Tax*!
Under Section 80C & 10(10D) of Income Tax Act, 1961*
Get Life Cover + Save tax up to Rs 46,800*
₹2 Cr Term Plan
@ 21/Day²
Free Health Management Services
upto ₹ 31,000 p.a.^^

Disclaimer:

2Above illustration is for Bajaj Allianz Life eTouch II- A Non-Linked, Non-Participating, Individual Life Insurance Term Plan (UIN: 116N198V01) considering Male aged 23 years | Non-Smoker Preferred | Annual Income =>Rs. 15,00,000 per annum | Indian Resident | Policy Term (PT)– 30 years | Premium Payment Term (PPT) – 30 years | Sum Assured opted is Rs. 2,00,00,000 | Online Channel | Standard Life | 1st Year Premium is Rs. 7,159. 2nd Year onwards premium is Rs. 7,760. Total Premium is Rs. 2,32,199 | Medical Rates | Yearly Premium Payment Mode | Death benefit opted is lumpsum payout and monthly instalments (Lumpsum Payout Percentage : 40, Income Payout Percentage : 60). Income payout instalment opted for 40 years | Premium shown above is inclusive of Online Discount only, no other discounts have been considered and exclusive of Goods & Service Tax/ any other applicable tax levied, subject to changes in tax laws, and any extra premium and is for illustrative purpose only. For more details on risk factors, terms and conditions please read sales brochure & policy document (available on www.bajajallianzlife.com) carefully before concluding a sale.

**5% Discount applicable for customer's first individual life insurance policy, applicable only on first year’s premium. 5% Discount for salaried customers, applicable only on first year’s premium. 6% Discount on online purchase is available for regular premium payment and limited premium payment frequency, applicable only on first year’s premium.

*Tax benefits as per prevailing Section 10(10D) and Section 80C of the Income Tax Act shall apply. You are requested to consult your tax consultant and obtain independent advice for eligibility before claiming any benefit under the policy. Above Tax benefit is calculated considering deduction of Rs. 150,000 and applicable tax rate of 31.20%.

^^Get Free Health Management Services upto Rs. 31,000 per year

Health Management Services Frequency Cost (₹)
Doctor Insta-Consultations 3 consultations per month = 36 consultations per year Average cost per session = ₹500
Total cost per year = ₹500 * 36 = ₹18,000
Health Coach
(Diet & nutrition consultations)
1 consultation per month =
12 consultations per year
Average cost per session = ₹500
Total cost per year = ₹500 * 12 = ₹6,000
Emotional Wellness
(Psychologists consultations)
1 consultation per month =
12 consultations per year
Average cost per session = ₹500
Total cost per year = ₹500 * 12 = ₹6,000
Network discounts: Throughout the year Assumption – Total expense on these services throughout the year
Medicines (M) = ₹5,000
Lab-test booking (L) = ₹5,000
Total discounts that can be availed:
M - 10% = ₹500
L - 10% = ₹500
Total per year as per assumption ₹31,000

Note: The above mentioned costs are based on estimated average market price for respective services. T&C apply.

Doctor Insta-Consultations and Health Coach Services are unlimited and the above numbers are assumed only for the purpose of calculation of the yearly benefit.

Bajaj Allianz Life Insurance Co. Ltd. | IRDAI Reg. No. 116

 

BJAZ-OT-EC-10260/24

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