Even though Term plan offers such wonderful benefits with too little premium, most of the customers don’t like it because it does not have a maturity value means no cash paid if the policy holder lives through the policy term.
Here the insurance companies plays the trick of returning the premium in case of survival by offering a new product which resembles a Term Plan. People are getting attracted towards this plan after making direct comparison with elder brother “Term Plan”
We should be aware that ” Nothing is free under the sun” in this corporate world. If we make simple mathematical comparison, we shall know the story behind.
Lets compare premium of Simple Term Plan with Premium returnable Term Plan
For 30 Year old male, Sum Assured 50 lakhs and Term 25 years as on 3rd June 2013
ING Term Life Rs. 14593.(Simple Term Plan)
ING Term Life Plus Rs. Rs. 36,161.(Premium return plan)
Maturity value Rs. 804550/-(Cumulative)
HDFC Term Assurance Plan Rs. 12575/-(Simple Term Plan)
HDFC Premium Guarantee Plan Rs. 40,051/-(Premium return plan)
If you note from the premiums offered for both plans from both companies, there is huge difference in premium.
My suggestion is instead of going for a Term plan with Return of premium benefit, one can go for simple Term plan with huge reduction in premium. You can invest the difference amount in either PPF or a Debt mutual fund, and earn much better return.
Lets take ING products for comparison. The difference in premium is approximately Rs. 21000/-. If this amount is invested in a mutual fund expecting a return of 10% will fetch around Rs. 15,00,000/- which is far better than the maturity value of premium return plan. Or you can use the difference amount as you wish which will reduce your future commitment.