Pure Term Insurance Vs Return of Premium Vs Permanent Life Insurance
Choosing the right life insurance policy can be a tough choice when you aren’t sure about what you need. Purchasing any kind of policy depends completely on what you require in the future. The amount of coverage, the tenure of the plan and your intention of purchasing insurance all cumulate to decide which plan you should buy. Many policyholders who want pure life cover end up getting a term plan. But the ones who also want a savings component along with a life cover choose to opt for policies like endowment plans, and money-back policy, amongst others.
| Factors | Pure Term Insurance | Return of Premium Plan (TROP) | Permanent Life Insurance |
| Policy | Pure term insurance provides you with a life cover for the entire policy term. No maturity benefit can be availed if you outlive the tenure of the plan. | Return of Premium Plan offers you a life cover for the fixed policy term. But if you outlive the term, the premiums are refunded back to you. | Permanent life insurance provides you with a life cover for your entire life. Some amount of the premium is deposited into a cash-value account. |
| Benefits | Death Benefit | Death Benefit + Survival Benefit | Death Benefit + Maturity Benefit |
| Tenure | 10-30 years | 10-30 years | Entire Life |
| Maturity Benefit | No maturity benefit | Only the premiums paid are refunded back | You receive a growing cash value of the invested amount |
| Surrender Value | No surrender value | Some amount of the premium is refunded to you | Current surrender value of the policy at the time of surrender is given |
| Tax Benefits | Premiums paid can be claimed under Section 80C |
Premiums paid can be claimed under Section 80C
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Premiums paid can be claimed under Section 80C
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| Death Benefit can be claimed under Section 10(10D) | Death and survival benefit can be claimed under Section 10(10D) as tax-free | Death and maturity benefit can be claimed under Section 10(10D) as tax-free | |
| Pros of the Policy | Life cover at affordable rates | Survival benefit if you outlive the term | Life cover for a long term |
| High sum assured at low premiums | Maturity benefit can be availed if you outlive the policy | ||
| Cons of the Policy | Premium rates depend on your age. Lower the age, cheaper the premiums | Premium is higher when compared to pure term plan | Premiums rates are higher when is compared to pure term plan and TROP |
| No survival or maturity benefit is available | Survival benefit is lesser when compared to the maturity benefit received from permanent insurance plans | Maturity benefit can only be availed on surrendering the policy or after the policy expires |
With the help of the above-given comparison, you can easily choose an insurance plan now based on your requirements and needs. If you are aiming for long-term wealth creation, permanent life insurance is for you but if you just want a life cover with a high sum assured, you should opt for term insurance plan.
