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The Long Read


Everything you *need to know* is right above this. Scroll down, only if you'd still like to read more (honestly, why?)

Zero cost term insurance (we can also call it as no cost term insurance) is a type of term insurance where you can exit the plan and get back all the premiums you have paid, minus GST, at a certain point before your policy tenure is over. This permitted time of exit is decided by your insurer. 

No cost term insurance aka zero cost term insurance works similarly to a normal term plan, it’s just that you get the option of getting your premiums back at a certain point during your policy period (decided by the insurer), by exiting the plan. 

Here are some great features of zero cost term plans: 

 

  • You get the option of getting your paid premiums back at a certain time in your policy period

  • They are an affordable form of life insurance 

  • They cover up to a certain period of time (i.e., policy period)

 

Benefits of getting a zero cost term plan are: 

  • Affordable way to protect your loved ones: They are an affordable way to secure the financial future of your family members
  • Option to get your premiums back: A unique benefit of getting a zero cost term plan is that one has the option to get their paid premiums back at a certain point during the policy period
  • Flexibility in paying for your policy: You can choose how you want to pay your premiums (such as monthly, quarterly, half-yearly or annually)
  • Tax benefits*: You can claim deductions on premiums paid under Section 80C of the Income Tax Act. Further, the life cover payout is tax free under Section 10 (10D)
     

 

*Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions and tax Laws are subject to change from time to time. You are requested to seek tax advice from Chartered Accountant or personal tax advisor with respect to personal tax liabilities under the Income-Tax law

A TROP (Term Return of Premium) plan refunds only your premiums at the end of your policy period only if you outlive the policy duration. For example: if you’re covered till 60 years and you are still alive when you turn 60, you will get back only your premiums if you have purchased a TROP plan. Whereas in zero cost term insurance, you can exit your term plan at a pre-decided time, before your policy period is over. You don’t have to wait till the end of the policy term to get back your premiums. TROP plans are also more expensive than zero cost term insurance. 
 

Find out more about TROP (Term Return of Premium) plans. 

Well, the answer depends on your financial requirements. You can consider buying a zero cost term insurance plan if:

 

  • You think that your financial responsibilities will reduce significantly in the future before your policy period is over

  • You want your term plan premiums back but don’t want to wait till the end of your policy period

 

But, before making a decision, understand this - 

 

  • Depending on your insurer, you’ll have to wait for a long period, say 25-40 years or more to get the premiums refunded. 

  • It is your insurer, and not you, who gets to decide when you can exit your plan and it will depend on factors like your: 

    • Age 

    • Policy term 

    • Plan features

 

The approved exit time may not suit your life plan at all. 

 

So, when buying a term plan, instead of focusing on features like zero cost, focus on factors such as: 

 

  • Your needs 

  • Plan features that meet your needs 

  • Brand trust 

  • Claim processing time 

  • Customer reviews



This will help you make an informed decision. 

 

You can also visit the KlarifyLife Term Guide to understand your term insurance needs and know how to customise your plan. 

 

Yes, as long as you’re eligible to buy a term plan, you’re eligible to buy a zero cost term insurance plan too. 
 

You are eligible to buy term insurance if:
 

  • You are between 18-65* years of age
     

  • You earn an active income and you can submit the income proof
     

  • You are an Indian citizen - resident/PIO/NRI
     

*varies from insurer to insurer

 

Even if you are a homemaker i.e. someone with no active income, you are still eligible to buy a term plan, provided you meet the other criteria. 

 

Find out more about being eligible to get a term plan. 

 

Term insurance should not be seen as an investment that gives you returns, it’s a tool to protect the financial future of your loved ones in an affordable way. It doesn’t provide any returns. However, you can get your paid premiums back if you have  a TROP (Term Return of Premium) plan or a zero cost term plan.


Now, if you are interested in getting your premiums back before your policy period is over, then yes, a zero cost term plan may be suitable for you. But remember, depending on your insurer, you will still have to wait for a long time, say 25-40 years or more to be able to exit your plan and get back your premiums. 
 

So by the time you get back your premiums, their value would have reduced a lot, thanks to inflation. You can consider investing the premium difference amount between a term plan and TROP in other financial instruments that can give you better returns (such as mutual funds). 

No. Unlike TROP plans, zero cost term insurance doesn’t cost you any additional amount. But it’s always a good idea to check and confirm the same with your insurer of choice. 

You should consider factors such as: 

 

  • Your needs 

  • Plan features that meet your needs 

  • Brand trust 

  • Claim processing time 

  • Customer reviews

  • Claim settlement ratio 

 

Find out more about selecting an insurance company for getting your term policy. 

That depends on your financial requirement. Let’s understand their features:

  • Point of exit:

    • You can’t exit a TROP plan. It will return you your premiums only after the policy period if you outlive your term policy duration. This means, you’ll have to wait for the policy period to end to get your premiums back. 

    • A zero cost term plan can refund your premiums at a certain point before your policy period ends. So you won’t need to wait for your policy duration to get over to get back your premiums.

  • Cost: 

TROP plans are significantly more expensive than zero cost term insurance plans. So prima facie, zero cost term insurance is better than a TROP plan as it offers the benefit of early exit at a much lower cost. 

 

No, it will not. Zero cost term insurance just provides an option to get your premiums back and doesn’t affect other aspects of a term plan like the cover, policy period, riders, etc. 

 

Check out the KlarifyLife Term Guide to determine what life cover you should opt for when buying a term plan. 

See, a zero cost term plan will give you an option to exit the plan in between your policy period. But it is your insurer who will decide when you can exit the policy and get your premiums back. The approved time of exit may not match the age when you want to retire. Check with your insurer about the permissible time of exit before you buy a zero cost term plan. 

 

If paying your premiums beyond your age of retirement is the main issue here, you can simply opt for a single pay premium payment term where you just have to pay all premiums at one go and you can be done with the hassle. 

 

Alternatively, you can opt for a limited pay premium payment term for whichever term plan you take and pay premiums only up to a certain number of years of your policy period. So, you can choose this option and pay your premiums till you earn. You don’t have to pay the premiums after retirement, and your policy will still remain active.

Yes, if you feel your children will become financially independent before your retirement, you can opt for a zero cost term plan. It will allow you to exit your plan before the policy period ends and return your premiums. 
 

But remember, you may still have a spouse who is financially dependent on you. Or you own a business which will be impacted by your sudden demise. In that case, it is recommended that you continue with your term plan so that if you die unexpectedly, your life cover can help them avoid a financial crisis. 

 

What’s more, you can even pass on your term insurance life cover amount to your children as a form of inheritance, if you are planning to use your term plan for estate planning. We understand your kids are financially independent, but there’s no harm in getting some additional inheritance from you, right?

 

So assess your financial requirements, and decide whether you should continue or exit your term plan. 

 

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