Wednesday, February 4, 2015

Term Insurance - THE RETURN OF PREMIUM PLAN

You pay a much higher premium to get back a pittance at the end of the term

Then there are the return-of-premium term plans aimed at people who think that buying a pure protection policy is a waste of money. So, insurance companies have devised plans that will return to the policyholder the entire premium paid by him on maturity. For gullible buyers, this is a great way to insure themselves for free. After all, they get the entire sum back at the end of the term. For intelligent buyers, this is a big lemon that should be avoided.

Let's look at how it works. The premium of such plans is quite high compared to what a regular term plan costs. Basically, the policyholder is paying a high premium to get back a pittance. If he invests the difference, he can accumulate a far bigger corpus than what the insurance company promises to return at the end of the term.

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