Not on Good Terms

Thursday 26, September, 2013 Term plans have become popular over the years. One reason for this is the introduction of online policies with 30-40% lower premiums. Even so, there are consumers who expect returns from an insurance plan. It is to cater to this segment that insurers have launched 'return of premium', or ROP, plans. "While what customers need is the primary vector of any product design, what they want is also important. Research indicates that Indian customers expect some return from life insurance policies, at least the capital," says V Viswanand, director & head, product management and persistency, Max Life Insurance. RETURN OF PREMIUM EXPLAINED It is a term plan, with death benefits, that returns the premium paid if the policyholder survives the policy term. In regular term insurance, insurers pay only when the insured person dies. Consider a policy with Rs 50 lakh cover for 20 years for which the yearly premium is Rs 5,000. If the insured dies, the family will be paid the sum assured, that is, Rs 50 lakh. However, if the insured survives the term, the insurer will return the premium or Rs 1 lakh (Rs 5,000 x 20). FANCY OPTIONS ROP plans have more premium payment options. For instance, Bajaj Allianz's Term Care Plan lets you choose between payment of premium throughout the term and paying the full premium when you subscribe to the plan. Similarly, Max Life has a relatively expensive short-term payment option, wherein you get protection for 20-30 years but pay premiums for only 11 years.

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