With term insurance return of premium if you survive the term of your policy then you are entitled to get your premiums back at the end of policy tenure. A term insurance with return of premium (TROP) is almost similar to a term insurance plan. It is a type of term insurance that offers life cover to beneficiaries like a standard term plan but also offers pay-out on maturity. In other words, if the insured person survives the policy tenure, he or she will be entitled to receive the premiums paid at the end of the term. However, also in case of death within the term, a life cover is provided to the beneficiary or nominee of the policyholder. It is a perfect life insurance plan for those who are looking for a savings plan along with life insurance coverage. People who are looking for financial support for their family members in their absence can also opt for a TROP.
How does Term Insurance with Return of Premium work
In a term insurance plan with a return of premium, the policyholder pays a premium amount for a tenure which can range between 5 years and 30 years. In case the policyholder dies within the policy tenure, his or her beneficiaries will receive the sum assured. However, if he/she survives the policy tenure, he or she will be entitled to receive the premium amount cumulatively along with interest and other additional benefits depending on the chosen policy. Let us understand how this works with the help of an example:
Ms Patrika, a 26-year-old working lady is looking for an option to save along with a life cover, so that in her absence her family will receive financial assistance. Hence she has opted for a term plan with return of premium (TROP) in which the annual premium is Rs. 15,000 and sum assured is Rs. 90 lakh and the policy term is 30 years.
Therefore, Ms Patrika will have to pay an annual premium of Rs. 15000 every year for 30 years. Here, there can be two scenarios:
Scenario 1: Ms Patrika passes away within the policy tenure
In case she dies within the term then her family members or nominees will receive the sum assured of Rs. 90 lakh.
Scenario 2: Ms Patrika survives the policy tenure
If she survives the policy tenure she will receive the entire premium paid throughout the tenure i.e. (15000*30= Rs.4,50,000) along with interest and other additional bonuses depending on the policy terms
Who Can Avail Term Plan with Return of Premium
Every single individual has a different financial planning as each of them has different financial objectives in life. The cost and benefits offered by term insurance can depend on various factors such as source of income, age, medical condition, lifestyle habits etc. If you are considering availing a term plan with a return of premium, it's essential to carefully assess the advantages. Generally, opting for a TROP may be more suitable for individuals belonging to the following categories:
Unmarried Individual: If you are an unmarried individual you might have the financial responsibility of your dependent parents and dependent siblings. Hence if you opt for term insurance with a return of premium, you can secure their future while keeping the costs low. In the event of an unfortunate demise, your family will receive a lump sum death benefit which will act as financial support for them. This will ensure they can meet expenses, repay debts and reach their life goals even in your absence. If you outlive the policy, you'll receive a refund of the premiums paid.
Married but No Children: If you are a married person with no children you can also consider availing a term plan with return of premium. If your spouse is entirely dependent on you, opting for a TROP can be a wise idea. You have the opportunity to establish a financial support system for them, safeguarding their future against unforeseen circumstances. The additional advantage comes in the form of the maturity benefit being provided at the end of the policy term.
Married Person with Children: If you are a married individual with children, availing a term plan with return of premium can be the best thing you can do to secure yourself and your family financially. Planning for their higher education, weddings and other objectives will be a vital element of your investment strategy. If you are the sole breadwinner in the family, the well-being of your spouse and children should also be taken into account. This means opting for a policy with sufficient sum assured to cover the requirements of all family members.
You can also wish to avail a life cover till the age of 100 years to provide financial protection to your financial dependents. A whole life insurance can help you secure the financial future of your loved ones till you are 100 years of age.
What Are the Benefits of Term Insurance with a Return of Premium?
Term Insurance with Return of Premium comes with several benefits some of which are as follows:
Refunds Your Premiums: TROPs come with the facility of refund of premium upon maturity of the policy if the policyholder survives the policy tenure. Hence it is ideal for individuals who are looking forward to availing a term life insurance and a lump sum payment after the policy term.
Tax Benefits: You can be eligible for tax benefits by availing of term insurance with a return of premium. The amount of premium paid under such a policy is tax deductible under Section 80C of the IT Act. Moreover, under Section 10 (10D), you can avail tax exemptions (with no limits) for both maturity and death benefits of a TROP.
Benefit of Rider Options: There are many insurers who offer rider options on TROPs, which basically allow the policyholder to enjoy additional benefits of term insurance over and above the base policy with a slight increase in premium. There are certain types of rider options offered by insurers:
Critical Illness Rider: It covers several critical illnesses such as stroke, cancer, heart attack etc.; the coverage varies from insurer to insurer.
Premium Waiver Rider: It allows the facility of premium waivers under certain specific conditions.
Accidental Death Benefit Rider: It is a rider option which covers the policyholder if he or she dies of accidental death, which otherwise is not covered in the base policy
Why is the Term Plan with Return of Premium Right for you?
A Term Plan with Return of Premium (TROP) offers a compelling solution for individuals seeking both financial protection and a return on investment. Unlike traditional term plans, TROP provides a lump sum payout of all your paid premiums (minus taxes) if you survive the policy term. This feature caters to risk-averse individuals who desire peace of mind with the potential to get their money back. Moreover, TROP plans offer competitive death benefits, ensuring your loved ones are financially secure in your absence. This unique combination of comprehensive life coverage and potential return on investment makes TROP a valuable option for individuals seeking a well-rounded financial safety net.
Features of Term Plans with Return of Premium
Death Benefits: In case of an unfortunate demise, the bereaved family will get the life cover or the sum assured from a TROP which is sure to act as a major financial support during tumultuous times. Ideally, this cover should be at least 10 times the annual income of the policyholder.
Survival Benefits: In addition to the death benefits, TROP ensures that the policyholder doesn’t lose their hard-earned money paid as premiums. Usually, 105% of the total premiums paid are returned on maturity in case of survival of the policyholder.
Tax benefits: Premium payment of TROP comes with tax exemption under section 80C of the Income Tax Act and lets you enjoy a deduction of up to Rs 1.5 lakh per annum. The death and maturity benefits offered by the policy are also exempted under sec 10 (10D).
Rider Benefits: You can add optional riders to your TROP and get covered for emergencies like critical illness or accidents. 50% of the sum assured can be claimed in case one gets diagnosed with a terminal disease, based on certain terms and conditions.
How to Choose the Best Term Insurance with Return of Premium?
When selecting a term insurance with return of premium (TROP) plan, it is crucial to take into account various factors. To guide you in making an informed decision, here are some essential points to keep in mind.
It is important to assess the coverage amount required to safeguard your family's financial well-being in case of your unforeseen demise.
Consider adhering to these straightforward guidelines, you can choose a TROP plan that aligns with your specific requirements.
Consider checking that the insurer has a high claim settlement ratio, as it reflects a history of successful and timely claim disbursements.
It is important to make sure that the premium payments align comfortably with your budget, allowing for consistent payments without compromising other financial obligations.
Opt for a term plan that offers flexible options for premium payments like semi-annual, annual, monthly or quarterly payments. This makes it easy and convenient for you to continue the policy.