You are an intelligent investor who wants to achieve your financial goals and secure your family’s future. You know life is unpredictable and must be prepared for any eventuality. You also want to maximise your money and get the best returns possible. How can you do that?One way is to incorporate a term plan with a return of premium (ROP) into your portfolio. A term plan is life insurance that covers a fixed period, usually 10, 20, or 30 years. If you die within the term, your beneficiaries will get the sum assured as a one-time payment or regular income. If you survive the term, there are no maturity benefits.
However, a term plan with ROP is different. It offers the same benefits as a regular term plan but with an added advantage: if you survive the term, you will get back all the premiums you paid tax-free. This way, you can enjoy both protection and savings with a single product.
Benefits of a Term Plan with ROP
A Term Plan with a Return of Premium can help you achieve your strategic financial planning in several ways. Here are some benefits:
- Affordable premiums: Compared to other life plans, such as endowment or unit-linked plans, a term plan with ROP has lower premiums. This is because it does not have any investment component or charges. You only pay for the pure risk cover and the ROP feature. This means you can get a high sum assured at a low cost and save more for your other financial goals.
- High returns: A term insurance with ROP can give you high returns on your investment. The ROP feature ensures that you get back all the premiums you paid at the end of the term, which can be substantial. For example, if you buy a term plan with ROP for 30 years with a sum assured of Rs 1 crore and an annual premium of ₹ 25,000, you will get back ₹ 7.5 lakh at maturity, which is equivalent to a compounded annual growth rate (CAGR) of 5.9%. This is higher than the average inflation rate of 4.8% in India and comparable to the returns of some debt instruments, such as fixed deposits or bonds.
- Tax benefits: A term plan with ROP also offers tax benefits under Sections 80C and 10(10D). You can file a deduction of up to ₹ 1.5 lakh per annum for the premiums you pay under Section 80C. You can also enjoy tax-free maturity proceeds under Section 10(10D) but with the condition that the sum assured is at least ten times the yearly premium. This way, you can reduce your tax liability and increase your net income.
- Flexibility: A term plan with ROP allows you to choose the term, sum assured, premium payment mode, and payout option that suits your needs and preferences. You can choose additional riders, such as accidental demise benefit, critical illness cover, or disability benefit, to enhance your coverage and protection. You can also modify your plan during the policy term, subject to certain conditions and charges.
How to Incorporate a Term Plan with ROP into Your Portfolio?
A term plan with ROP can be a valuable addition to your portfolio, but you must consider some factors before buying one. Here are some tips to help you:
- Assess your needs: Answer these questions before deciding on optimal coverage. This is based on the income you need to maintain your current lifestyle and meet your future expenses, the debts you may have and their remaining tenure, and the lifestyle you envision for your family in your golden years.
- Compare plans: The next step is to compare different term plans with ROP available in the market. Take help from online calculators, aggregators, or comparison websites to compare the features, benefits, premiums, and ratings of various plans.
- Buy online: Buying online has many advantages, such as convenience, speed, transparency, and lower cost. You can buy your plan from the comfort of your home or office without any intermediaries or paperwork. You can also access all the information and documents related to your plan online, anytime and anywhere. Moreover, you can save on the commission and distribution costs usually charged by agents or brokers and get a lower premium.
Conclusion
A term plan with ROP is a smart and strategic financial planning tool that can help you protect your family and save for your future. It offers a combination of life cover and savings, with affordable premiums, high returns, tax benefits, and flexibility. You can incorporate it into your portfolio by assessing your needs, comparing plans, and buying online. By doing so, you can achieve your financial goals and secure your peace of mind.
