Zero Cost Term Insurance: What makes this plan so attractive?

There have been only 2 types of term plans in the insurance market i.e., Pure term plans and Return of Premium (ROP) plans. In pure term plans, no maturity benefit is provided in case of surviving the policy term. However, the nominee receives the sum assured amount if the insured dies during the term. On the other hand, ROP provides a return of premium if the policyholder survives the policy period at an additional cost.

The public has shown apprehension about buying a term plan as they don't give any maturity benefits on the survival of the policyholder till the end of the policy term. To overcome this reluctance, insurers are now offering zero cost term insurance as an alternative. It allows policyholders to exit their plan at a specific life stage and get their entire premiums back (excluding tax deductions) whenever they want during the period offered by the insurer. Max Life, Bajaj Allianz and HDFC life insurance are among those that have introduced zero cost term plans at affordable rates.

Table of contents:

What is a Zero Cost Term Insurance?

Zero cost term insurance policies allow the policyholder to discontinue the term plan at a specific point of life. This plan gives you an option to get all your term insurance premiums paid back whenever you want during the time period provided by the insurer. However, this option is only available for long-term plans.

Let’s understand how zero cost term plan works with the help of an example:

If Ram buys a zero cost term plan with a policy tenure of 40 years where he can exercise the option of exit in the 25th year of the plan. Then, after exiting the plan, ram will receive all the premiums paid back.

Note: Now that you know that what is Zero Cost Term Insurance, you should also get to know about what is term insurance to buy a term plan for your loved ones.

Why should you buy Zero Cost Term Plan?

Let us take a quick look at the reasons to buy Zero Cost term Insurance plan:

• Policyholder can discontinue the plan and stop paying premiums at a specific life stage where they have no more liabilities

• More affordable than TROP

• Premiums returned even at the early termination of the policy

• Suitable for those who are uncertain about their age of retirement and wish to opt for a long-term cover

• Only available on plans with a long life cover of 35-40 years

Note: It is suggested to calculate the term plan premium on the term insurance calculator online tool by Policybazaar before buying.

Difference between Zero Cost Term Insurance and TROP (Term Return Of Premiums)

The premium rates for ROP (return of premium) term insurance plans are 70% to 80% more expensive than a regular term plan. In addition to this, zero-cost term plans do not charge any extra premiums. Both plans have their own benefits but there are some significant differences that exist between these two. In zero-cost term plans, the term coverage ends when the policyholder surrenders the plan and wants a return of the premium paid back. Whereas in return of premium plan, the term coverage continues even after refunding the payment of all premium amount back. Zero-cost term plans are more suitable for salaried individuals and ROP term plans are best for self-employed individuals.

Zero Cost Term Insurance in 1 minute

If you are paying a life insurance premium amount for a long period and then decide to not continue with it, you often lose all the premium you paid. However, a new variant, zero cost term plan has been introduced where the policyholder can exit the plan at a specific life stage and the entire premium paid up until that point would be returned (during the time period provided by the company) after some GST deductions.

Note: Check out the best term insurance plan in India and choose one that suits your requirements.