Friend: I’m considering buying a term insurance policy, but I’m not sure if it’s right for me.
I don’t like the idea that if I outlive the policy term, I don’t get anything back. All the premiums I paid over the years would go down the drain.
Me: I totally understand your concern. But what if there was a way to get term insurance protection without having to worry about losing your premiums?
Friend: Really? How?
Me: Zero-cost term insurance is a new type of policy that returns all of your premiums if you surrender the policy during a specific exit window, typically 20 – 30 years after the policy starts.
Friend: That sounds amazing! But there must be a catch, right?
You: Well, the main catch is that zero-cost term plans typically come with long policy terms.
Imagine a world where your family is financially secure, even if you’re gone.
That’s the power of term insurance. It’s a simple, affordable way to protect your loved ones from the financial hardship that can come with the loss of a loved one.
I know the importance of term insurance firsthand. When I was in school, my father passed away suddenly. My mother was able to take care of my studies and upbringing thanks to the lump sum amount we received from his term insurance policy. It was a lifeline in our time of need.
Term insurance: A new innovation
When it comes to term insurance, most people are familiar with the two main options:
- Plain-Vanilla Term Plans are the most basic type of term insurance. They provide a death benefit to your beneficiaries if you die during the policy term, but you don’t get any money back if you outlive the term.
- Return of Premium term plans are more expensive than plain-vanilla plans, but they offer a return of all premiums paid if you outlive the term.
But now, there’s a new option on the block: Zero-Cost Term Insurance.
A new type of term insurance that gives you the peace of mind of knowing that your family will be financially protected if you die unexpectedly, and the potential to get all of your premiums back.
Imagine being a 35-year-old parent, with two young children to care for. You want to ensure their financial security, even if you’re gone. You purchase a zero-cost term insurance policy with a sum assured of Rs. 1 crore for an annual premium of Rs. 20,937 (base premium of Rs. 17,743 + GST of Rs. 3,193).
Fast forward to age 60. You’re now financially secure and content. You have the option to surrender your policy and receive a substantial refund of Rs. 4,43,581 (25 times the base premium).
Zero-cost term insurance: Is it right for you?
Zero-cost term insurance offers three main benefits: flexibility, affordability, and the potential to get your premiums back.
Flexibility: You can choose to continue with the policy until maturity or surrender it during a specific exit window to get your premiums back.
Ideal for the Young and Middle-Aged: If you’re in your 20s, 30s, or 40s, you have the opportunity to choose a policy with a long term and take advantage of the flexibility of zero-cost term insurance to get your premiums back if you no longer need the coverage in the future.
No Additional Premium: The best part is that you won’t be charged extra premiums for this option.
Drawbacks to Consider
Long Policy Term: Zero Cost Term Plans typically require a policy term of 40 years or more.
Limited Exit Window: You can only surrender your policy during a predefined time frame, typically 20-30 years after the policy starts.
Inflation Impact: The refund you receive when you surrender the policy will have significantly reduced purchasing power due to inflation.
Should you consider zero-cost term insurance?
I think zero-cost term insurance is a great way to protect your family financially without having to worry about losing your premiums, and it offers the flexibility to get your premiums back if you surrender the policy during a specific exit window.
If you’re considering term insurance, you can reach out to us to learn more.
