Zero-cost term insurance policies woo policyholders

Hyderabad: Term insurance is the cheapest and effective investment channel that provides financial protection to a family. However, there are still many who think there is no real need or a benefit for them personally. In a step that will encourage such fence sitters to consider a term policy, insurance companies are now offering zero-cost […]

Hyderabad: Term insurance is the cheapest and effective investment channel that provides financial protection to a family. However, there are still many who think there is no real need or a benefit for them personally. In a step that will encourage such fence sitters to consider a term policy, insurance companies are now offering zero-cost term insurance policies that return the premiums paid if the subscribers discontinue the policy at a later stage.
“Some subscribers may feel that they no longer need a term policy as they do not have any liabilities. Mostly this is around the retirement phase. At this point, they can exit the zero-cost term insurance policies and get back the premiums paid,” said Sajja Praveen Chowdary, Head Term Life Insurance, Policybazaar.com.

Two companies MaxLife and Bajaj are now offering these zero-cost term insurance policies. Two or three more companies are in the pipeline to launch their products shortly. Gradually, all insurers will offer this feature, he said.

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Under the regular plan, a policyholder continues to pay the premium till the policy term. The sum assured is paid to the nominees if there is a death of the policyholders. If they survive the term, or opt out, they do not get the premiums back. There is also a variant called term return of premium (TROP). These return the premiums paid if policyholders survive the policy term. The response for these has not been high as the premium is nearly twice the regular term policy.

MaxLife is offering the zero cost term insurance at Rs 1,283 per month for a 30-year, non-smoker, salaried person (male) with a sum assured of Rs one crore. The same person, if he were to go for a return of premium policy, it will cost Rs 1,973 per month for the same sum assured. For the regular policy, the premium is pegged at Rs 999 per month. Bajaj is offering the zero cost premium for Rs 1,102 per month. The term return of premium is Rs 1,496 per month while the regular term policy is priced Rs 816 per month. The coverage is till 60 years for the regular as well as return of premium policies. It is 75 years for the zero cost term insurance. The exit points allowed vary with the policy.

The zero-cost term insurance policies have the best of these two as the premiums are not high as TROP and allow policyholders the flexibility to discontinue after a certain period and get back the premiums paid (minus the GST).