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Kriti Arora
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Kriti Arora

Insurance Writer

Kriti is a content marketing and branding expert with more than 13 years of rich experience across BFSI and Telecom industries. She is currently leading Digital Creative Strategy for Axis Max Life Insurance.

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Vaibhav Kumar
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Vaibhav Kumar

Insurance Expert

With over 15 years in life insurance, Vaibhav is a recognized products and digital leader for driving innovation at Axis Max Life. He's played a pivotal role in developing new business lines and implementing successful D2C strategies.

What is Term Plan with Free of Cost Special Exit Value~1 that Gives Premiums Back?

A term plan with free of cost special exit value~1 can be defined as a type of term insurance policy with an add-on wherein the premiums that have already been paid by the policyholder during the policy term are returned when the policy term ends.

This implies that the life insured enjoyed all the benefits of term plan including death benefit during the policy tenure and at the end of the policy term, the premium paid is refunded to the policy holder. So, effectively the benefits of the term plan were availed by the policyholder at minimal cost.

The amount that is refunded to the policyholder is on the basis of special exit value~1, and this benefit is typically offered as an add-on to regular term plans with an additional premium being charged for this benefit. However, one should keep in mind that the premium refunded as per the special exit value~1 clause does not include the GST payments made along with the premiums during the policy term.

How Does Term Plan with Free of Cost Special Exit Value~1Work?

Special exit value~1 is the feature which allows the premiums paid during the policy term to be refunded at the end of the term plan tenure. This allows the policyholder to exit from the policy in a specific window and receive a refund for the policy premiums that have been already paid. Typically, such a refund of premiums through special exit value~1 benefit is exclusive of GST paid and an additional premium amount may need to be paid in order to get this this add-on benefit.

Let’s understand how this works with an example. Suppose you have bought a term plan with special exit value~1 benefit with cover till the age of 65 years. In such a case you might have a window of up to 5 years i.e. after you are 60 years old till the policy matures to avail the special exit value~1 benefit. Once this refund of previously paid premiums is processed, the policy will be terminated and you can no longer avail the benefits of the term plan.

One way to determine when you would want to avail the term plan with free of cost special exit value~1 that pays premiums back is to approximate the time by which you all your debts will be paid off and your dependents might become self-reliant. This way, you’d be able to exit from the policy and save on the premiums you had already paid for the term plan.

Features of a Term Plan with Free of Cost Special Exit Value~1

Below-mentioned are some of the prime features of a term plan featuring the special exit value~1 add-on:

  • Cost effective option since the premiums are paid back (minus the taxes) to the policyholder if they choose to exit the policy
  • Tax benefits available as per the prevailing tax laws on the entire premium paid including taxes under Section 80C
  • Death benefits and additional add-ons as per the customisations available with the term plan

Benefits of a Term Plan with Free of Cost Special Exit Value~1

The benefits of a term plan with free of cost special exit value~1 that gives premiums back are directly proportional to its features, viz.:

  • Cost effectiveness is the most important benefit. You have the option to get all the paid premiums back excluding GST at the time of exit
  • Term plans with special exit value~1 value benefit ensures high life cover of Rs 1 crore or more during the policy term, while the premium refund at time of exit essentially means that you get insured at no charge
  • Just like any other term plan, you get tax benefits u/s 80C as per prevailing tax laws on the premiums you pay. Also, death benefit is also exempt from tax under Section 10(10D).
  • Additional customizations can be done in terms of life cover amount, policy term and premium payment frequency as per the policyholder’s needs.
  • This is an ideal option for individuals who want the benefit of life cover for a specific period of time and also want to minimise the cost of purchasing a term insurance policy.

Limitations of Term Plan with Free of Cost Special Exit Value~1

Just like any other term plan, term plans with special exit value~1 also feature few limitations that prospective policyholders need to be mindful of. Some key limitations of a term plan featuring special exit value~1 at no additional cost to keep in mind include:

  • Limited period to opt for the facility as the special exit value~1 and subject to various terms and conditions as per policy prospectus.
  • Term plans including those with the special exit value~1 benefit are pure protection plans. Hence these cannot be treated as an investment.
  • Taxes that you’ve paid on the insurance premium for the term plan are not refunded.
  • Inflation is not factored into the refund amount calculated under the special exit value~1 that you will receive at the time of exit.

Now that you have a better understanding of the key benefits and features of these term plans, let's take a closer look at what you need to look at when purchasing a term plan with Special Exit Value~1.

Things to Consider Before Purchasing a Term Plan with Free of Cost Special Exit Value~1

Keep in mind a few things before you go ahead and decide on purchasing a term insurance policy with special exit value~1:

  • This term plan is a pure protection offering and only the premiums that you have already paid will be refunded.
  • You have to avail the special exit value~1 benefit within a specified period as mentioned in the policy document. Post-expiry of this period, you will not have the option to receive the premium refund.
  • There’s no maturity benefit under this type of term plan and only death benefit is offered during the policy tenure.
  • This type of insurance policy does not feature an investment component hence it cannot grow your wealth over time.
  • Availing the benefit may require payment of additional premium, hence, do check if there are any charges or fees that are applicable.
  • Go for an insurer with a good reputation and a high death claim paid ratio, solvency ratio, etc. This can help ease the burden at the time of making claims

Documents Required to Purchase a Term Plan with Special Exit Value~1

Since a term plan with free of cost special exit value~1 that pays premiums back is a variation of a traditional term insurance policy, you are required to submit some standard KYC documents to purchase the policy. Examples of such documents include:

  • PAN Card
  • Photo-ID Proof (Driver’s License, Aadhaar, Passport, etc.)
  • Residence Proof (Valid Driver’s License, Aadhaar, Passport, etc.
  • Income Proof (Salary Slips or copy of filed Income Tax Return)
  • Medical reports (if asked by the insurer)
  • Age Proof
  • Recent passport-sized coloured photograph(s)

The above short list is for illustrative purposes only and the insurer may ask for additional documentation from prospective policy buyers of a term plan with special exit value~1 benefit on a case by case basis.

FAQ's: About Term Plan with Free of Cost Special Exit Value

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Is there an additional premium charged for special exit value~1 in a term insurance plan?

Are there any survival or maturity benefits in a term plan with special exit value~1 at no additional cost?

Are the premiums paid towards a term plan with special exit value~1 exempt from tax?

What happens if the life insurer dies while a term plan with free of cost special exit value~1 is in force?

ARN: June24/BI/18B

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