Amidst the rising turbulence across the globe about health and health safety, term insurance purchase has become no less than essential. The Covid-19 pandemic and the continued rise in the active cases have made us all realize the importance of planning for financial support for our family when we are not around. However, there is one thing that most people want to know about – returns from a term plan. In its basic form, a pure term plan does not provide any maturity benefit. If you want this benefit, you should go a term plan with return of premium.
Before you buy a term policy with return of premium, let’s dig deeper.
What is a Term Plan with Return of Premium?
Also known as TROP, a term insurance plan with return of premium is a variant of term insurance. It is similar to a standard term plan that provides life insurance coverage or death benefit to the policy nominee. However, the key feature of a term plan with return of premium that sets it apart is the maturity benefit you can receive.
It means the policyholders are eligible to receive the maturity or survival benefit in case they survive the chosen plan tenure. You should also know that:
- The premium of the best term plan with return of premium is comparatively higher than a standard term plan.
- A term plan with return of premium is a non-participating insurance plan.
You can better understand the difference between a standard term policy and term insurance with return of premium by knowing how it works.
How Does Term Insurance with Return of Premium Work?
The following example will help you know about the working of a term plan with return of premium –
Mr. Mehta purchased a TROP with a life cover/sum assured of Rs. 50,00,000 for a period of 30 years and agreed to pay an annual premium of Rs. 5,000. As per the plan’s terms, the policy nominee chosen by Mr. Mehta will receive Rs. 50,00,000 (death benefit) in case he dies within the next 30 years. However, if he survives the chosen tenure, he will receive the premium paid back, i.e., Rs. 5,000 x 30 = Rs. 1,50,000, as defined in the policy terms.
Top Reasons to Buy the Best Term Plan with Return of Premium
It can be said that the term insurance plan with return of premium is designed for those individuals who want returns along with life insurance coverage. The name of this variant of term insurance is self-explanatory. Still, there are many reasons that make TROP the first choice of policy buyers.
- It provides financial security to your loved ones, and peace of mind to you.
- It offers an assured return of premium, which means you will receive the total premiums paid during the plan tenure – a guarantee that you will get the premiums back.
- You can also select other riders with your policy to extend its overall coverage.
- You can avail of tax benefits under Section 80C and Section 10(10D).
Also Read: Types of Term Insurance in India
Who Can Buy Term Plan with Return of Premium (TROP)?
Before you buy any term insurance policy, it is important to understand the fact that different individuals can have different financial objectives in life. Hence, a term plan that is suitable for one person may not be equally suitable for the other. The same holds true in case of term policy with return of premium.
The suitability of a term insurance policy depends on several factors, including your income, age, lifestyle, and current health condition. Therefore, it is crucial to analyze your financial profile to find and buy the best term plan with return of premium.
In general, individuals falling in the following three categories can choose to buy TROP based on their self-assessment:
Unmarried or single
For them, the maturity benefit of TROP ensures that they receive the amount paid as premiums after the plan tenure ends. In case of their unfortunate demise, the nominee (mostly parents) will receive the death benefit as defined under the chosen plan.
Married and having children
With a TROP, these individuals can create a financial support system for their family/dependents to deal with any eventuality that may arise.
Married with children
As parents, people handle a wide range of financial responsibilities for the well-being of their loved ones. In case there is only one earning member in the family, managing regular expenses and saving money for future needs can be difficult. It is where the assurance of receiving maturity benefit under a TROP can be helpful.
Benefits of Term Plan with Return of Premium
The following table covers the three types of benefits you can get under a suitable term insurance policy with return of premium:
|Return of premium benefit
|Return of all the premiums paid in case of survival after the policy term
|Sum assured for the nominee in case of the insured’s demise
|Tax deduction on the premium paid for TROP
What are the Primary Features of Term Insurance Plan with Return of Premium?
|Features of TROP
|Which makes it easier for individuals to buy this variant of term insurance
|Multiple premium payment options
|One-time payment, regular payment till the end of the plan tenure, limited payment for a specific number of years (depending on the chosen insurer)
|The amount you receive in case you discontinue paying the premium
|Availability of riders
|Like personal accident rider, hospital cash rider, disability rider, etc.
More About Return of Premium with Limited Pay Option
The premium payment options given to the policy buyers is yet another aspect that differentiates one insurer from the other. You might have come across life insurance companies that offer various options to pay the premium, one of which is limited pay.
In general, the limited pay option provides the flexibility to pay the premium for a fixed number of years. For example, let’s assume you choose 10 Pay premium payment option with your term insurance policy. Irrespective of the plan tenure for which you will get the insurance coverage, the total premiums payable will be divided into 10 years. It means you need not pay any more premium after these 10 years while your term plan with return of premium continues.
Similarly, there are other common premium payment options, such as:
- Single pay (paying the total premium in one go as a lumpsum)
- Regular pay (continuing to pay the premium amount throughout the chosen term plan tenure)
- Pay till 60 (paying the premiums till the age of 60 while the plan coverage continues)
Note: The actual definition and terms of these premium payment options may differ with respect to different insurance companies.
Term Plan with Return of Premium Vs. Pure Term Insurance
|Term Insurance with Return of Premium (TROP)
|Pure Term Plan
|Variant of term insurance policies
|Simplest form of life insurance, also known as pure protection plan
|Offers death benefit along with survival benefit (return of premium)*
|Offers only death benefit
|Offers a comparatively lower sum assured
|One can choose a higher sum assured
|Premium charged is comparatively higher
|Available at an affordable premium
|Best suited for those who want returns along with insurance coverage
|Best suited for those who only want financial protection for the family
What to Consider Before Buying a Term Plan with Return of Premium?
Given below are a few handy tips to simplify buying the best term life insurance with return of premium:
- Avoid buying a plan based only on the maturity/survival benefit it offers. The ones which offer high returns might not be affordable for you.
- Select an adequate sum assured after carefully assessing your financial profile.
- Select the tenure of these plans carefully as it cannot be changed later.
Visit BimaBandhu Before Buying TROP
Buying the right type of life insurance policy requires you to first understand its long-term impact on your life. The same holds true while buying term insurance with return of premium. At BimaBandhu, we are dedicated to providing detailed information about various aspects of insurance policies, be it TROP, pure term plan, health insurance, etc. That’s why, we say:
‘Insurance hai Zaruri, Par Sahi Chuno’
Is term insurance with return of premium worth it?
The most obvious advantage of buying a TROP plan is its survival benefit or return of premium benefit. However, it is more important that you do not make the buying decision based on this benefit only.
Can we get the premium back with term insurance?
You can get the premiums back on buying a term plan with return of premium and surviving the chosen policy tenure.
What is TROP plan?
Term plans with return of premium benefits are also known as TROP plans.
Which insurers offer term insurance with return of premium?
In general, most life insurance companies offer these plans. For more details, you can check their official websites.
Which is the best term plan with return of premium?
The best plan is the one that provides maximum benefits to you and your family in the long run without causing any financial trouble in the meantime.
Are riders available with TROP plans?
This depends on the life insurance company you choose.
Does my smoking habit affect TROP premium?
The premium rates for a smoker and non-smoker may vary with different insurers.
Should I buy a TROP or a pure term plan?
It is up to you to decide which plan suits your profile after carefully assessing the related financial requirements.