- Date : 02/11/2022
- Read: 4 mins
Zero Cost Term Insurance provides the policyholder the flexibility to withdraw the coverage if they believe there is no need or if a family member is financially dependent.
A Zero cost term insurance plan is a unique opportunity for a customer to exit a term plan and get back the premiums they have paid if they think they no longer require the term insurance. Unlike other term insurance plans this plan provides the user with a choice to opt out of the term plan once the plan reaches a certain age decided by the insurer.
In compliance with this plan, the policyholders may receive a reimbursement of the premiums they have paid excluding GST, if they feel that each of their obligations has already been fulfilled around retirement age and no longer require a term insurance policy.
Zero Cost Term Insurance Plan
Many worry that if nothing tragic happens, they may have spent much money on term insurance costs. Term life insurance provides the most cost-effective and practical investment for a family's financial stability. Many believe they don't require or profit individually from such a term plan. A growing number of insurance companies are offering zero-cost insurance policies that reimburse premiums paid if customers live out the term of the policy.
Zero-cost insurance plans are a type of life insurance plan. In this type of life insurance plan, the policyholder has always had the choice of terminating the plan at a specific period and receiving reimbursement of all premiums paid up to that point. These amenities are only provided for long-term plans. However, it is unusual and attractive since the premium option is returned. It performs effectively for salaried people.
Also Read: What is a Term Plan?
Features of the Zero Cost Term Insurance Plan
- Such a program allows the policyholder to terminate the coverage and quit making premium payments after their responsibilities have been addressed.
- After terminating services, the consumer will receive reimbursed premiums, excluding any appropriate GST.
- These policies' premiums are equivalent to those for conventional term insurance and do not become more expensive, like TROPs.
- According to data, more than 60% of policyholders select term policies that protect individuals until age 70 because they wish to be sure that their families are secured in the long run in case of unforeseen incidents.
- Consumers under the age of 45 qualify for the zero-cost term programs.
Also Read: TROP (Term plans with return of premium)
Is it Zero Cost?
At first, it's crucial to understand that there is no such entity as "zero-cost" insurance. Regardless of the type of policy term, repayment of premium or another insurance has a charge. Customers should be aware that even though they'll get their payments back, they will forfeit whatever return they would have gained on the extra amount over the term of the 20–25-year insurance. This is the "cost" associated with this type of scheme.
It generally costs roughly Rs 12,000 yearly for a regular insurance plan for a 30-year-old to safeguard him for Rs 1 crore over 30 years. In contrast, the average cost of zero-cost insurance coverage for the same period is about Rs. 15,500 annually. Therefore, if somebody purchases a zero term insurance plan he will presumably pay an additional cost of approximately Rs 3,500 per year for 30 to 40 years.
Also Read: Mistakes to avoid while buying a Term Plan.
Even after paying payments for a significant amount of time, individuals who terminate their life-term insurance policies typically lose all advantages. For such protection, this causes a complete loss situation. Meanwhile, the zero-cost term plans are not plagued by this disadvantage. Here, the policyholder seems to have the option of terminating the plan at specified life stages that the insurer has established at the beginning of the policy. The best part is that each insured can receive a complete refund of all premiums paid up until that point, excluding the income tax deduction.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.