Taking life insurance to secure the financial future of your family has become very important in today's time. Especially, if you are the only breadwinner of your family, then the importance of life insurance increases a lot. However, when it comes to choosing an insurance plan, people are very confused.

Currently, most people take the Endowment Policy. In this, a lump sum amount is paid after the untimely death of the policyholder or after a certain period. This time period can be 10, 15, or even 20 years. But, now the trend of term plans is also increasing. In this too, insurance companies are selling return-of-premium term plans by luring premium returns.

Let us know how the return-of-premium term plan is different from the normal term plan. Also, which term plan is more beneficial to take?

What is a normal term plan?

In both normal and return-of-premium term plans, the same amount is received after death. The difference lies in the amount received after maturity. There is no such thing as maturity in a normal term plan. On the other hand, in return-of-premium, you get back all the money deposited.

Problem of return-of-premium
The offer of getting the entire premium back after maturity may seem tempting. But, in reality, there is a big problem with it. Its premium is quite high. Usually, about two and a half to three times more than the premium of a normal term plan. Whereas you do not get any benefit other than getting the premium back on maturity. After doing the complete calculation, this benefit seems less and loss more.

Disadvantages of return-of-premium
Suppose you are 30 years old and you have taken a term cover of Rs 1 crore for the next 30 years. The annual premium of ICICI Prudential's normal term plan is Rs 12,686. On the other hand, for return-of-premium, you will have to pay Rs 28,360 in a year.

In both situations, in case of untimely death, you will get Rs 1 crore. But, compared to the normal plan, you will have to pay about two and a half times more amount as return-of-premium. You will just get your premium of Rs 8.54 lakh back after maturity.

There is more benefit in doing SIP.

The thing to keep in mind is that there will be no interest on this return-of-premium amount. This means that after adjusting for inflation, the value of your Rs 8.54 lakh after 30 years will be around Rs 50 thousand today.

On the other hand, if you choose a normal term plan instead of return-of-premium and do a monthly SIP of the remaining Rs 1,300, then you will be more benefited. After 30 years, you will get around Rs 92 lakh even at the rate of 15 percent return. Your annual return of 7 to 10 percent can also give you Rs 25 lakh to 50 lakh in 30 years.

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