Get extra benefit out of 'zero cost' life plans offered by insurance firms

Many people avoid taking insurance policies that do not pay anything if a policyholder outlives full tenure. To address this gap, the insurance companies have come up with 'zero cost life plans' that give extra benefits like paying back all premium paid by the policyholder. Such plans are drawing the attention of income earners who are eager to lay a strong foundation for the financial security of their families.

Hyderabad: Insurance policies lay a strong foundation for the financial security of our entire family but most of us avoid taking them due to lack of immediate monetary benefits. There is no patronage to life plans that do not yield anything if a policyholder outlives full term. In the light of this, we have to consider the financial implications. If anything happens to an income earner, then financial difficulties will surround all the dependent family members - spouse, children, parents and other dependents.

So, it goes without saying that the breadwinner should take responsibility for the future safety of the entire family and make investments accordingly. If life insurance is taken, it will prevent all sorts of financial distress even if the breadwinner passes away in untoward incidents.

As of now, the life insurance market is providing many types of plans - term insurance, endowment, ULIPs (unit linked insurance plans), money back policies, etc. Of all these, term policies offer maximum insurance at minimum premium. However, term plans do not yield maturity benefits if the insured outlives the tenure. As a result, some people do not subscribe to term plans under the notion that their money would go waste in the absence of maturity payout.

To address these concerns of policy holders, some insurance companies are offering 'return of premium' on term plans. If policyholders outlive full tenure, the company would repay all the premium paid by the plan holders till then. Now, the insurance firms are offering such benefits in the name of 'zero cost term insurance' plans. They are also options to withdraw policies after a fixed period.

If the holders of 'zero cost term plans' withdraw, the company will pay them all the premium paid till then. So, the policy holder can enjoy the benefit of insurance coverage without incurring expenditure on their part during this period. This is why the insurance companies have named it a 'zero cost plan'. Many people take policies aiming at a longer term till they reach 70 to 80 years of age. But, they often lose interest after some time. Moreover, if there are no dependents any more, they tend to stop the insurance plans. They will derive added advantage as they would get back all the premiums they have paid till then.

The 'zero cost term insurance' plans will be very useful for those not having clarity on their retirement and for those aiming at long term investments. These plans are being provided presently by Max Life, Bajaj Allianz and HDFC Life.

The attractive features of 'zero cost term plans' include the facility for the policyholder to quit anytime after a fixed initial period. All the premium paid till then will be returned. However, this benefit would be given only when in respect of term plans ranging from 35 to 40 years. As per available data, over 60 percent policyholders opt to continue term plans till 70 to 80 years of age keeping in view the long term security of their families. Such persons can easily withdraw these policies once they do not have dependents any more.

The insurance companies will pay all the premium by deducting GST to the policyholder upon his withdrawal. The premium under zero cost plans are the same as other regular term plans and not expensive like return of premium plan or TROP (term insurance with return of premium). Only those below 45 years of age are eligible to avail of the zero cost plans.