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Zero Cost Term Insurance

Zero Cost term insurance is a new kind of term insurance benefit that offers insurance holders the liberty to exit the term insurance at a particular time along with allowing them to take their premium amount paid to the insurer back. Zero Cost term insurance promises insurance holders the return of their premiums at a fixed date. In layman's terms, you can purchase term insurance at the standard market premium rates, pay the premiums for a set number of years and forgo the policy, and have all your premiums returned to you. 

However, there is an important catch under the Zero Cost Term Insurance benefit wherein it offers premium payments back after the GST deductions, which may vary as per tax laws and the insurer. When opting for a zero-cost term insurance benefit, customers can not opt for the return of premium option. You can opt only for one of the two benefits when purchasing a plan.

Difference Between Term Insurance & Zero Cost Term Insurance 

Term Insurance is a simple and pure protection cover wherein the insurance holder pays the premiums to the insurance providers and gets a life cover. If the insured individual dies, the nominated individual gets the term insurance benefit, which is the assured death benefit to continue a comfortable lifestyle. Term insurance is simple and straightforward. 

However, a zero-cost term insurance plan has a unique feature wherein insurance holders can exit their term insurance plan and get the return of their premiums. Zero-cost term plan also offers multiple rider options that insurance holders can select. The zero-cost term insurance policy usually has a long policy term of 35-40 years. There are various companies who are selling zero-cost term insurance such as Max Life Insurance, Bajaj Life Insurance, HDFC Life Insurance, and ICICI Life Insurance.

Benefits Of Zero Cost Term Insurance

Zero Cost Term Insurance offers a plethora of benefits to insurance holders that are mentioned below

  • Affordable Premiums: When insurance holders opt for a zero-cost term insurance plan they can be assured of affordable premium rates as these plan variants are not as expensive as their Return of Premium Plan counterparts. The premium rates of zero-cost term insurance policy do not create financial pressure on your budget
  • Peace of Mind: Usually, customers avoid purchasing a term insurance plan because of the common notion that a pure protection plan will not provide any monetary benefit and all the premiums paid to the insurance provider are a waste if the insured individual survives its policy tenure. However, with a zero-cost term insurance plan the customer has the power to exit the policy after continuing the policy for a given number of years as policy tenure.
  • Exit Before Full Term: As compared to the return of premium plans where an individual has to pay premiums till the end of the policy term, a zero-cost plan allows users to exit the policy when they feel have fulfilled their responsibilities and have no liabilities left.
  • Best for Salaried Individuals: People working in the public sector can be assured of the security of their family members as the public sector provides for pension, medical care in case of retirement or death. However, if you are a salaried individual in the private sector it is best to invest in a zero-cost term insurance policy as you can get your premiums back after a particular policy term.
  • Better Financial Planning: When opting for a zero-cost term benefit, customers have the liberty to choose to avail of their smart exit option when liabilities such as loans, and children’s education are fulfilled leading to better financial planning for a family.
  • Tax Benefit: Zero Cost term insurance policy offers tax benefits to the insurance holders under section 80C of the Income Tax Act, 1961. Moreover, the death benefit paid to the nominee is also eligible for tax benefit under section 10 (10D) of the Income Tax Act, 1961.

Factors To Consider Before Purchasing Zero Cost Term Insurance

There are a few factors that must be considered before purchasing a zero-cost term insurance plan in order to realize its full potential and benefits

  • Understand the Terms and Conditions: It is important to understand the mechanics of a zero-cost term insurance plan and read its terms and conditions before making the purchase decision. The plan is designed to safeguard your family against any unfortunate incident and also give you the liberty to leave the policy after a certain policy tenure. However, every insurance provider has different terms and conditions that are essential to understand in order to plan your finances better.
  • Sum Assured: Zero-cost term insurance policy plans may provide you with a limited coverage amount which is why it is essential to consider if the policy is offering an adequate sum assured based on your financial obligations, and liabilities such as education loans, home loans, etc.
  • Consider Policy Term: Zero-Cost Term Insurance Plan does provide you the benefit of exiting the policy after a certain policy period. However, before purchasing a zero-cost term insurance policy you must keep in mind that the policy term aligns with your financial goals and liabilities in order to take full advantage of the potential provided by a zero-cost term insurance.
  • Optional Riders: Zero Cost term insurance plan offers a plethora of benefits to the customers and one of them is an additional array of riders. Riders are additional advantages added to your base policy on a nominal premium charge. These riders may cover accidental death benefits, critical illness benefits, and more. Before purchasing a zero-cost term insurance make sure you consider the optional riders available under a zero-cost term insurance plan.
  • Terms and Conditions: As lucrative as the name zero-cost term insurance sounds, we know for a fact that nothing is available at zero cost. It is essential to read the terms and conditions of zero-cost term insurance policy thoroughly and make sure there are no hidden charges. Customers must ask these queries to their insurance providers in order to make a better purchase decision.

How Does Zero Cost Term Insurance Work?

Let us understand the zero-cost term insurance plan with an example

Rakesh, a 40-year-old living with his wife and 10-year-old daughter has borrowed a housing loan worth INR 50 Lakhs. To ensure his family’s financial stability in case of his demise, Mr. Rakesh avails zero-cost term insurance policy with a policy term of 30 years. The family will receive a sum assured of INR 70 Lakhs in case he passes away. After 15 years Mr. Rakesh’s daughter starts earning and is financially independent. After Mr. Rakesh got good investment returns he paid off his housing loan and realized he does not need the term cover anymore. With the help of a zero-cost term insurance plan that he invested in, Mr. Rakesh now opts to exit the policy and receives the premiums he paid towards the policy back.

Cover your Family by term insurance Cover your Family by term insurance

Best Zero Cost Term Insurance Plan

We have listed below some insurance providers offering zero-cost term insurance to insurance holders with various features and benefits

Parameters  Max Life Smart Secure Plus Bajaj Allianz E-Touch  HDFC Click 2 Protect Super  ICICI Prudential iProtect Smart  Canara HSBC iSelect Smart 360
Entry Age 18 - 60 years  18 - 45 years  18 - 65 years 18 - 65 years 18 - 65 years 
Min. Policy Term (Zero-Cost) 40 years 35 years or more 36 years  25 Years 25 Years
When Can You Exit The Policy?  25th/30th policy year Available during 3 policy years immediately after you attain Age 60 Exit after 30 years but not during the last 5 policy years Any year greater than 25 but not during the last 5 policy years 25th policy year
Sum Assured  50k to 1 Crore 50 Lakh to No Limit 5k to no limit N/A 5 L to 2 Crore
Claim Settlement Ratio  99.51% 99.04% 99.31% 97.90% 98.44%

A unique all-around protection plan providing coverage for 64 critical illnesses and terminal illnesses with an option of skipping the premium post 10 policy years.

Unique Benefits

  • Increasing sum assured
  • Return of Premium
  • Cover for Spouse

The plan provides pure term and health coverage, providing whole life cover and accidental total permanent disability.

Unique Features

  • Waiver of Premium(WOP)
  • Accelerated Critical Illness(ACI)
  • 4 variants

eTouch Online Term (Pros)

  • Shield
  • Shied Plus
  • Shield Supreme

eTouch Online Term (Cons)

  • No Loans Allowed
  • No Surrender Benefit
  • No Maturity Benefit

eTouch Online Term (Other Benefits)

  • Max Sum Assured 2 Cr
  • Sheild Super
  • High Sum Assured Rebate (HSAR)

eTouch Online Term (Eligibility Criteria)

  • Entry Age -18 Years
  • Max Entry Age- 65 Years
  • Minimum Sum Assured - 50 L
  • Maximum Maturity Age - 75 Yrs
  • Premium Payment Term - 10 to 40 Yrs

A term plan that offers all-around protection to the policyholder as it protects against 36 critical illnesses, accidental death benefits, etc.

Unique Features

  • Life Stage Option
  • Multiple Coverage Options
  • Increasing Death Benefit

HDFC Life Click 2 Protect Super (Pros)

  • Terminal Illness Benefit
  • Smart Exit Benefit
  • Acceleration Death Benefit

HDFC Life Click 2 Protect Super (Cons)

  • 1 Year WP for Suicide
  • No Policy Loans
  • No Pre-existing Conditions

HDFC Life Click 2 Protect Super (Other Benefits)

  • Death Benefit in Instalments
  • RP, WOP & 3 Riders
  • Additional Cover for Spouse

HDFC Life Click 2 Protect Super (Eligibility Criteria)

  • Entry Age -18 Years
  • Max Entry Age - 84 years
  • Minimum Sum Assured - INR 5,000
  • Maximum Maturity Age - 85 years
  • Premium Payment Term - RP/SP/LP

This plan offers an optional accidental death benefit of up to 2 crores, extended coverage until age 99, and includes coverage for Covid-19 claims.

Unique Features

  • Unlimited Maximum Sum Assured
  • Smart Exit Benefit
  • Waiver of Premium Benefit

iProtect Smart Term Plan (Pros)

  • Major Organ Benefit
  • Accelerated Critical Illness Benefit
  • Choose your Policy Term

iProtect Smart Term Plan (Cons)

  • No Loans Allowed
  • Modal Loadings
  • No Maturity Benefit

iProtect Smart Term Plan (Other Benefits)

  • Brain and Nervous System Benefit
  • Heart and Artery Benefit
  • Terminal Illness and Disability Enhanced Protection

iProtect Smart Term Plan (Eligibility Criteria)

  • Entry Age -18 Years
  • Max Entry Age- 65 Years
  • Minimum Sum Assured - NA
  • Maximum Maturity Age - 75 Years
  • Premium Payment Term - RP/SP/LP

Canara HSBC iSelect Smart360 Term Plan

A Non-Linked, Non-Participating, Individual, Pure Risk plan that offers 3 plan options with steady income benefits.

Unique Features

  • Life cover till 99 years
  • Child Care Benefit option
  • Income Benefit after 60 years

iSelect Smart360 Term Plan (Pros)

  • 3 Plan Options & Spouse Cover
  • Accidental Death Benefit
  • Accidental Total & Permanent Disability

iSelect Smart360 Term Plan (Cons)

  • No Policy Loan Allowed
  • No Maturity Benefit
  • No Benefit On Revival

iSelect Smart360 Term Plan (Other Benefits)

  • Critical & Terminal Illness
  • Option To Block Your Premium
  • 5% Loyalty Discount

iSelect Smart360 Term Plan (Eligibility Criteria)

  • Entry Age -18 Years
  • Max Entry Age- 65 Years
  • Minimum Sum Assured - 25 L
  • Maximum Maturity Age - 81 Yrs
  • Premium Payment Term - RP/SP/LP(5&25 Years)

Process To Purchase Zero Cost Term Insurance 

Below mentioned are the steps to follow in order to purchase a zero-cost term insurance plan 

  • Estimate and assess your needs 
  • Visit the official website of an insurance company 
  • Select a suitable plan as per your requirements 
  • Opt for an adequate amount of Sum Assured 
  • Apply for the Policy selected 

Documents Required to Purchase Zero-Cost Term Insurance

In order to purchase a zero-cost term insurance policy, customers must produce the following documents

  • Identity Proof 
  • Adhhar Card (Identity Proof) 
  • Income Proof 
  • Medical Reports 


Zero-cost term insurance is an exceptional tool for individuals who want to offer coverage to their loved ones but also require the flexibility to exit the policy in case they do not require it anymore. It is an apt tool for salaried individuals as they can receive their premiums back and also exit the policy after fulfilling their financial goals. However, individuals must keep in mind that zero cost term insurance plan does not allow you to exit the policy whenever you want, you still have to serve a certain amount of policy period before availing the smart exit option offered by these plans.

Zero Cost Term Insurance: FAQ's

1. Can customers exit zero-cost term insurance at any given point?

No, zero-cost term insurance plans do not allow customers to exit the policy at any given point in the policy period. You can avail of the special exit feature only after a certain amount of years mentioned during the purchase of the policy. Individuals can exit the policy on the basis of terms and conditions laid down by the insurance providers which varies from insurer to insurer.

2. Which insurance provider offers zero-cost term insurance?

There are multiple insurance providers that offer zero-cost term insurance plans, such as Bajaj Allianz, HDFC Life Insurance, ICICI Prudential, Max Life Insurance, and more.

3. Are zero-cost term insurance plans the same as return of-premium plans?

No, the major difference lies in the fact that in a return of premium plan, the insured individual will receive all the premiums once the policy term concludes and not before that. Whereas in a zero-cost term insurance policy, you can forego the policy after a specific policy term period depending on the policy and insurance provider selected. Return of premium plan premiums is generally more expensive than zero-cost term plans wherein you don’t have to pay extra in order to avail of a zero-cost term insurance plan.

4. Do all insurance providers offer a zero-cost term insurance policy?

No, not all insurance providers have designed a zero-cost term insurance plan. However, a large number of insurance companies have started offering this particular variant of plan.

5. Are tax benefits available under a zero-cost term insurance plan?

Yes, tax benefits are applicable on premiums paid towards the zero-cost term insurance plans under the Income Tax Act.

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