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Zero Cost Term Insurance Plan: What is & Should you buy it?

A zero-cost term insurance plan can exit at a certain age and get all the premiums. Read to know the zero-cost term plan and whether you should buy it.

  • Dec 07, 2022

The purest and least expensive type of life insurance is called “term” insurance. According to the insurance terms, it offers the policyholder’s family financial security in the terrible event of their passing. An individual’s age, annual income, total debt, location, gender, present savings, investments, etc., are all considered when determining how much life insurance coverage is necessary. These elements aid in understanding your present and long-term financial goals, which later are used to determine the ideal sum assured.

Recently, insurance companies have begun to provide zero-cost term insurance policies that combine the advantages of both of these options, allowing you to receive your premium back upon surviving without having to pay a hefty premium. It might be confusing to choose from the various Term Plans that are offered, and many people wonder if they should select a standard plan, a Return of Premium plan, or a Zero Cost term plan online.

What a Zero Cost Term Insurance is, how it differs from a standard and the Return of a Premium Term Plan, and if you should get one are all covered in this article.

What is a Zero Cost Term Insurance?

If you want to purchase term life insurance, there are three different types of term plans you can choose from:

  • Normal term plan
  • The return of the premium term plan
  • Zero-cost term plan

A standard term plan provides a death benefit if the policyholder’s untimely passing during the policy term. It does not, however, offer a maturity bonus if the policyholder survives the policy term, unlike regular life insurance. When compared to standard term insurance policies, the premium is significantly lower, and you can have the highest sum assured for a reasonable premium.

If the policyholder passes away during the policy term, the Return of Premium Term Plans also provide the same death benefit. If the policyholder lives to the end of the policy term, they get their entire premium back, less GST. However, the Return of Premium Term Plans’ premiums is roughly twice as high as those of the standard Term Plans. Additionally, you are unable to leave the plan before the policy term. The insurer is not required to reimburse you for the paid premiums if you cease making premium payments or terminate the plan before the conclusion of the term.

The recently released Zero Cost Term Insurance combine the greatest features of both worlds. These term insurance policies have substantially lower premiums than Return Premium Plans and offer the paid premiums to the insured upon the completion of the policy period. While the premiums for Return of Premium Term Plans are 70% to 100% more than those for standard Term Plans, the premiums for Zero Cost Term Insurance are 40% to 50% lower. According to the terms and conditions of the insurer, the policyholder may also cancel the policy before the policy term expires and receive a full refund of all premiums paid.

What advantages do Zero Cost Term Plans offer?

  • The plan includes both the normal Term Plan and the Return of the Premium Term Plan’s advantages.
  • The Return of Premiums Term Plan is significantly more expensive than the Zero Cost Term Plan.
  • You can leave Zero Cost Term Plans at various points throughout your life. As a result, the insurer won’t have to worry about losing the premiums they already paid when they decide to leave the plan once they are retired or have paid off all of their responsibilities.

A more economical option to the standard Term Plan and Return of the Premium Term Plan is the recently released Zero Cost Term Plan. In the tragic event of the policyholder’s passing, the nominee will receive the sum assured, and if the policyholder survives, they will receive their whole premium payment, less any non-refundable fees and taxes. In addition, much like with a standard Term Plan, the policyholder can advise the insurer that they wish to cancel the plan and receive a refund of their premium payments, less any nonrefundable fees and taxes.

If you’re thinking about purchasing a term policy, it’s a good idea to research the insurers that offer it and compare it to a standard term policy in terms of premium, coverage, customer service, ease of purchase and renewal, claim settlement ratio, claim settlement process, etc. before making a decision. Ensure you read the policy’s fine print before purchasing the Zero Cost Term Plan to prevent any unpleasant surprises down the road.

Kotak e-Term

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  • Life Cover till 85 years for Life & Life Secure Option
  • 3 Payout Options
  • Special Rates for Women
  • Option to exit the policy with premium refund at the age of 60*
  • Special Rates for Non-Tobacco Users
  • Free Medical Check Up every 5th year**

Ref. No. KLI/22-23/E-BB/2435


- A Consumer Education Initiative series by Kotak Life

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