Indians want value for their money, so endowment plans have always been very popular. Even when they take life insurance, and there is no eventuality, people do not want their premiums to go to waste.
Experts recommended taking a term plan, which is a pure protection plan. More and more people are now going for term plans and insurance companies have launched term plans which are not exactly term plans. There are ‘refund on premium’ (ROP) term plans. Now, there is something called the double refund on the premium term plan.
“Traditional term plans offer only a death benefit; however, with the new ROP term plans, you get term life cover throughout the policy term and also an opportunity to exit your policy at a particular age (generally 10 years before the policy term) and receive 200 per cent of the total premiums paid,” says Varun Agarwal, head of term insurance, Policybazaar.
Since you receive twice the total premiums paid somewhere near your retirement age, this amount serves as a sizeable retirement corpus. If life coverage is no longer needed after a certain age, you can exit and reap the benefits of this corpus.
“These plans offer the best of both worlds: term life cover and double ROP if you choose to exit your policy at a particular age (generally 10 years before the policy term). The double ROP feature also gives consumers a very good opportunity to plan their retirement corpus,” says Agarwal.
Also, this can give a false sense of security. If one exits the policy, the primary objective of the protection of the family will be compromised. Also,
With refund premium plans, part of your premium is allocated to the refund and not to life cover. So, the sum assured (death benefit) could be lower than that of a similar-cost traditional term plan.
So, these plans could be suitable for specific people who want guaranteed savings and who want their life coverage only till a certain date. If one is going for a single-term plan, this plan is not likely to work.
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