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Zero Cost Term Insurance

TeamAckoMay 13, 2024

In India, life insurance is essential to financial planning, providing peace of mind to individuals and their families. While term insurance policies offer a cost-effective way to secure your family's future, the premium payments can add up over time. Fortunately, some insurance providers offer zero cost term insurance in India, allowing policyholders to enjoy the benefits of a term insurance policy without the financial burden of premium payments. In this article, we'll look closer at zero cost term insurance, its benefits, limitations, and how to buy the plan.




What is a Zero Cost Term Plan?

A Zero cost term plan provides the buyer with the best of both worlds- they enjoy the security benefit of any basic term plan while offering to pay back all the premiums like a Return of Premium Term Plan. Simply put, zero cost term plan allows the policyholder to discontinue paying the premium on their term plan at a chosen point. The premium for this plan is almost the same as the regular term plan.

What are the features of a Zero Cost Term Plan

Here are the features of a Zero cost Term Plan.

  1. Zero Cost Term Plans offer coverage for a specific period of time.

  2. It covers an individual until 99 years of age.

  3. The benefits of both, regular Term plan and Return of Premium plan can be availed with this plan.

  4. The plan is more economical when compared to the Return of Premium plans without much disadvantage.

  5. Zero cost Term Plans are mainly introduced to people who want to get a return on their premiums made.

  6. Policyholders can discontinue paying premiums at various points of their life, they don’t have to worry about losing any premiums they already paid.

  7. The premium amount paid is tax deductible up to Rs. 1.5 lakhs every year under the old regime.

  8. Policyholders can choose the policy term in insurance and sum assured to meet their financial objectives and circumstances.

  9. Zero cost term plans offer long-term coverage if the policyholder wishes to fulfil their responsibility. However, they need to pay premiums for a long time.

  10. Ideal for salaried personals to fulfil their responsibilities and then can stop paying their premiums.

Real-life example of Zero cost Term Insurance

Consider Gautham, a 40-year-old man who lives with his wife and 10-year-old son. He borrowed a housing loan of Rs. 50 Lakhs to buy a comfortable house for his family. To ensure that his family is financially secure in case he passes away, Gautham bought a Term Insurance plan with a policy term of 30 years.The sum assured of the plan was Rs. 70 Lakhs. If he dies during the policy term, his family will receive Rs. 70 Lakhs to repay the loan and meet their financial needs.After 15 years, Gautham's son started earning and became financially independent. Also, Gautham's other investments started doing well, and he used them to pay off the housing loan. At this point, Gautham realised that he did not need the Term plan anymore. He had opted for a Zero cost Term plan, and received a refund on the premium paid.

Steps to buy a Zero cost Term Plan

Here are the general steps to buy the Zero cost Term Plan in India.

Step 1: Assess your need

Step 2: Select a suitable insurance company

Step 3: Choose the sum assured and the policy term

Step 4: Analyse the premium amount and other terms and conditions of the plan

Step 5: Apply for the policyThe insurance company will review the application and issue the final policy as soon as possible.

Required documents

You may need the following documents to buy a Term plan,

  1. Identity proof

  2. Residence proof (Aadhaar Card,etc)

  3. Income Proof

  4. Medical reports(if the policyholder is above 45 years)

Please note: The above list of documents is indicative and may change as per the terms of the insurance company.

Benefits of the Zero Cost Term Plan

Here are the benefits of the plan.

High coverage

A Zero Cost Term Plan offers high life insurance coverage at zero cost. For instance, the sum assured in many cases is as high as Rs. one crore.

Affordable premium

The premium for a Zero Cost Term Plan is very affordable. The insurer charges a premium only for the first few years of the policy term, which is refunded at the end of the policy term if the policyholder survives the policy term.

Tax benefits

Under Section 80C of the Income Tax Act, 1961, premiums paid towards a Zero Cost Term Plan are eligible for tax benefits. The death benefit received by the nominee is also tax-free under Section 10(10D) of the Income Tax Act, 1961 under the old tax regime.


A Zero Cost Term Plan offers flexibility in terms of policy term and sum assured. The policyholder can choose the policy term and sum assured as per their requirement.

Limitations of Zero Cost Term Plan

Here are some limitations of the plan.

Limited coverage

Zero cost Term plans offer coverage for a limited period of time, and once the policy term expires, the policyholder will not receive any benefit. Moreover, the sum assured provided by these plans is also limited and may not be sufficient to cover the family's financial needs in case of the policyholder's untimely demise.

No maturity benefit

Unlike traditional insurance policies, Zero cost Term plans do not offer any maturity benefit. This means that if the policyholder survives the policy term, he/she will not receive any benefit.

Limited flexibility

Zero cost Term plans offer limited flexibility regarding policy duration, premium payment frequency, and coverage amount. The policyholder cannot change the policy once it is purchased.

Limited premium payment term

The premium payment term in a Zero cost Term plan is usually limited to a few years, and the policyholder is required to pay the entire premium upfront. This may not be feasible for many individuals who may prefer to pay their premiums in instalments.

Strict surrender policies

Zero cost Term plans come with strict surrender policies, and the policyholder can only surrender the policy during a specific time window. The policy's surrender value may also be lower than other traditional insurance plans.

No investment component

Zero cost Term plans do not have any investment component and do not offer returns or profits. This means the policyholder cannot expect any returns on the premium paid.

How is Zero cost term plan different from Return of premium plan?

Here are some key differences between the two plans.



Zero Cost Term Plan charges less premiums than its counterpart, making it easy for salaried personnel to meet their responsibilities and save as well.

Return of Premium term plan charges a significantly high premium rate from the policyholder. 

For Zero Cost term plans, policyholders have the option to get their premiums back early, or continue paying for the plan.

Return of Premium term plan’s coverage continues till the policy end term on the premiums paid and only upon the end of the policy term, does the policyholder receive the  premiums. 

Zero cost Term life insurance is best suited for salaried employees.

Zero cost Term life insurance is best suited for the self-employed persons.

Things to consider before purchasing a Zero cost Term Plan

Here are some things to consider before buying the plan.

  • Understanding the policy

Before purchasing a Zero cost Term plan, it is important to understand the policy's terms and conditions. These policies are designed to provide coverage for a specific period and may not have any survival benefits. It is important to read the policy document carefully, understand the coverage and benefits offered, and evaluate if it meets your insurance needs.

  • Coverage amount

Zero cost term plans may limit the coverage amount that can be availed. Determining the required coverage amount based on your financial obligations and liabilities, including loans, mortgages, and other expenses, is important. Ensure that the coverage amount offered by the policy is sufficient to meet your family's financial needs in case of your untimely demise.

  • Premium payment

While the policy may be free, Zero cost Term plans may have other charges such as service tax, education cess, etc. It is important to understand the charges associated with the policy and ensure that you are comfortable with them. Additionally, ensure that the premium payment terms and frequency are convenient and feasible.

  • Policy term

The policy term is the period for which the policy provides coverage. Selecting a policy term that aligns with your financial goals and obligations is important. Opting for a policy term that extends until your retirement age or beyond is recommended.

  • Riders

Riders are additional benefits that can be added to the policy at an extra cost. These benefits may include Accidental Death BenefitsCritical Illness Cover, etc. Evaluate if these riders align with your insurance needs and opt for them accordingly.

  • Insurance company

Lastly, selecting an insurance company with a good reputation, track record, and customer service is important. Research, read reviews, and evaluate the insurance company's financial stability before purchasing a policy.

Policy Tenure: This refers to the period during which an insurance company has the right to provide life coverage to you, the policyholder. For this reason, you must choose a plan length which matches your financial requirements. You should buy a term plan with a lifetime renewal option.

Explore ACKO Life Flexi Term Plan

A pure and non-linked ACKO Life Flexi Term plan is known for its unmatched flexibility. It offers all-inclusive coverage for you and a financial safety net for your loved ones. Whether you're purchasing a new home or expanding your family, you have the freedom to adjust your coverage up or down at any time to suit your evolving needs.  This plan presents a range of key advantages:

Adaptable Sum Assured

Flexible Policy Tenure

Flexible Payout Options

Will Creation Service

Affordable Premiums

Easy Claim Process

Wrapping Up

Zero-cost term plans are an excellent tool for those who wish to provide coverage to their loved ones while also having the opportunity to quit the policy if they no longer want it. It is an ideal instrument for salaried persons since they may receive their premiums back and quit the coverage after they have met their financial goals. However, individuals should remember that zero-cost term insurance plans do not allow you to quit the policy at any time; you must still serve a set length of time before using the smart exit option provided by these plans.

Frequently Asked Questions

Here are the answers to the given questions regarding the zero cost term plan


Can I exit the Zero Cost Term Plan before the full term?

Yes, the Zero Cost Term Plan allows you to exit before the full term is over. 

What is the duration of the policy term in the Zero Cost Term Plan?

Zero Cost Term Plan usually has a longer policy term.

What are the factors that can affect my life insurance premiums?

The premium for any term plan is affected by the policyholder’s age, gender, medical history, family history, lifestyle, and type of policy.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.


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