Opting for a variant also means a person needs to shell out higher premiums. Take the return of premium as an example. Many policyholders are not comfortable with the fact that they don’t get anything back when they pay for a term plan. To address this concern, insurers started offering the return of premium. At the end of the policy tenure, the individual gets back the premium. For many insurers, the premiums for this option double. If you are paying a premium of, say, Rs 12,478 for a sum of Rs 1 million assured for a simple term plan, for a return of premium, you will need to pay Rs 24,351. If you buy a simple term plan and invest the differential (Rs 11,873), you will end up with a bigger corpus than what you receive at the end of the policy tenure.
Financial planners say that variants such as decreasing the sum assured or structured payout are still handy. If you have bought a house taking a loan, opting for a decreasing sum assured helps as the cover reduced with your liability. “The premiums are lower for decreasing the sum assured. The premium-paying term is also lower than the policy term,” says Anil Kumar Singh, chief actuarial officer, Aditya Birla Sun Life Insurance. For a 20-year policy, the premium-paying term would be up to 15 years.
In a structured payout plan, the insurer pays a lump sum on the death of the policyholder and also a monthly income for a pre-decided period. If the spouse is not financially savvy, monthly income plan can take care of the finances on the death of the bread earner.