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What is a Term Plan with a Return of Premium (TROP)?
Term Insurance with Return of Premium is a term plan that offers financial coverage to your loved ones in case of the policyholder’s demise. But here is the twist- you will get all the premiums back (premiums paid minus GST) at the end of the policy tenure.
The premiums of a term plan with a return of premium are higher than a pure term plan as your premiums are returned at the end of policy tenure. Some additional benefits associated with TROP include partial or full disability benefits, accidental death benefits, and guaranteed protections against critical illnesses. TROP can bring a sense of overall protection with dual benefits under a single-term plan.
How Does Term Insurance with Return of Premium Work?
Here, we’ve simplified how a term plan with a return of premium works with an example-
- Bhanu is a 25-year-old man living a healthy life with no alcohol or history of medical problems and wants to secure his life with a term plan.
- He buys a return of the premium term plan and pre-decided its sum assured is around Rs. 40 lakhs.
- However, the yearly premium for his plan is Rs. 14,000 for a tenure of 50 years.
- If Bhanu passes away within the policy term, the nominee will get Rs. 40 lakhs coverage.
- But if Bhanu clears out the policy tenure, he will receive maturity benefits under the return of the premium term plan.
- After that, the insurer will pay back the premiums paid towards the plan to Bhanu so that he will get Rs. 7,00,000 (14,000 x 50) upon maturity of the policy.
Best Term Plan with Return of Premium
| Name of the Plan | Entry Age | Maturity Age | Unique Features | Check Plans |
|---|---|---|---|---|
| ICICI Pru iProtect Return of Premium | 18 to 65 years | 85 years | Return of premium with Life Stage Cover, Online discount, Flexible premium payment methods | |
| Max Life Smart Secure Plus Plan | 18 to 65 years | 85 years | Premium break option, Special exit value, Terminal illness cover | |
| Bajaj Allianz Life eTouch Online Term | 18 to 65 years | 75 years | Premium holiday option, Extra payout in case of death due to accident, Choose how your family receives death benefits | |
| PNB MetLife Mera Term Plan Plus | 18 to 65 years | 99 years | Spouse cover protection, Choice of plan option, Options to enhance cover with riders | |
| Canara HSBC iSelect Smart360 Term Plan | 18 to 65 years | 81 years | Child care benefit, Life stage benefit, Spouse cover | |
| ABSLI DigiShield Plan | 18 to 65 years | 55 years | Flexible premium payment term, Rider options to choose from, Inbuilt terminal illness cover |
What are the Features of a Term Plan with Return of Premium?
Here are some features of a term plan with a return of premium option:
Death Benefits
In case of the policyholder’s uncertain demise during the policy tenure, death benefits are paid to the policyholder.Maturity Benefits
If the policyholder survives the policy tenure, maturity benefits which is the return of premium are paid to the policyholder.Tax Benefits
The policyholder enjoys the tax benefits on the premiums paid under Section 80C and Section 10 (10D) of The Income Tax Act, 1961.Additional Rider Benefits
To enhance your coverage, you can choose additional rider benefits with your term plan with a return of premium, such as an accidental disability rider or a critical illness rider.Level premiums
Your premiums under the TROP plan remain the same throughout the policy tenure.
Benefits of Term Insurance Return of Premium
As insurance plans are specifically chosen based on their benefits, then Term Insurance Return of Premium also offers a set of advantages to the insured, such as:
Return on Premium Paid
You will get all your premiums paid back once your policy tenure ends if you survive the policy tenure.Surrender Value
Term Life Insurance with Return of Premium gives the freedom to surrender the insurance plan to the policyholder if he/she plans to discontinue the plan. In that scenario, the surrender value is given to the policyholder depending upon the payment done by him/her.
Who Should Buy Term Plans with Return Of Premium?
We understand that making a selection for any plan or its benefits is always crucial to leverage the maximum profit of the plan. Likewise, it is also important to understand who should take the Term Insurance Return of Premium plan.
Unmarried Individuals
If a person is single with no dependents or responsibilities such as a wife or kids then Term Insurance with a Return of Premium can be beneficial for him/her as it will work like an investment that the person can get during the late years of life.
No long-term responsibilities
If a person knows that he/she will have no responsibilities during old age such as a loan or burden of kids’ education or wedding as they are settled in their lives and are independent. Then a person can go for the Return of Premium Term Insurance plan wherein he/she can take the benefit of the premium paid during the policy tenure.
Married with kids
Also, Term Insurance Return of Premium can be useful for those who have a huge set of responsibilities and are aware that they might need money after 40-50 years of duration. Then this premium received back in the form of a maturity benefit can help them survive that crucial time.
Pure Term Insurance vs Term Plan with Return of Premium
Pure term insurance and the return of premium are variants of term insurance that come with their own set of extra perks and limitations. So, it takes a lot of work to select which one buyer should purchase. Here, we’ve simplified the comparison between pure term insurance and the return of premium to help buyers end their confusion.
| Parameters | Pure Term Insurance Plan | Term Plan with Return of Premium (TROP) |
|---|---|---|
| Definition | It is a part of life insurance that provides life coverage for a specific term. Under this plan, buyers only get death benefits and don’t receive survival benefits if they complete the policy tenure. | It is one of the variants of term insurance where the policyholder receives life coverage for a specific term. Under this plan, the insured person opts for both Death Benefit + Survival Benefit. |
| Surrender | If policyholders surrender their policy before the tenure, their cover will be ceased, and they end up getting nothing. | If policyholders surrender their policy before the tenure, their cover will be ceased, and they will get a small amount of the premium paid. |
| Tax Benefits | Under this plan, policyholders get these benefits:- Sec 80C - Premium paid eligible for a tax deduction Sec 80D - Critical illness add-on rider eligible for a tax deduction Sec 10(10D) - Death benefit is tax-free | Under this plan, policyholders get these benefits:- Sec 80C - Premium paid eligible for a tax deduction Sec 80D - Critical illness add-on rider eligible for a tax deduction Sec 10(10D) - Death benefits and maturity benefits are tax-free |
| Cons | Keep that in mind: the premium will keep increasing as the policyholder’s age increases, and no maturity benefits will be paid if the insured person clears the policy tenure. age increases, and no maturity benefits will be paid if the insured person clears the policy tenure. | The premium is expensive as compared to the basic term plan. However, the premium will keep increasing as the policyholder’s age increases, but you’ll receive a refund of all the premiums paid if you outlive the policy tenure. |
| Who should buy it? | To protect your family members financially in case of your demise so your loved ones can freely manage their finances in your absence. | If you’re living a healthy lifestyle with no medical history or harmful addiction, then you should consider buying a term insurance plan with a return of premium. |
Conclusion
Term Insurance with Return of Premium is a great option for people who are looking for protection for their families as well as investment plans for themselves. Thus this plan gives a complete win-win situation to the policyholder by giving one or another benefit.
If you are still confused about choosing the right term plan with a return of premium you can contact us at PolicyX.com or call us at 1800-420-0269.
Term Insurance Return of Premium: FAQs
1. What are the reasons for the return of premium in insurance?
A term plan with a return of premium provides for a refund of the premiums paid on a term life insurance policy if the policyholder does not die during the policy tenure.
2. What is the disadvantage of the return of premium in term insurance?
Although the return of premium life insurance refunds your money, but it is a lot costlier than a traditional term life insurance policy.
3. Does the return of premium in term insurance have tax benefits?
Yes, the return of premium in term insurance has tax benefits under Section 80C and 10(10D) respectively of the Income Tax Act, 1961.
4. How do you calculate the return of the premium?
To calculate the return of premium in term insurance you have to subtract the sum of all premiums from the maturity benefit amount, you will get your net returns.
5. Which type of insurance would be used for a return of premium rider in term insurance?
Term insurance has a return of premium rider which is generally offered as a separate endorsement but few insurance companies have specific policies that already include the built-in benefit of a return of premium rider.
Other Term Insurance Companies
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Written By: Himanshu Kumar
Himanshu is a seasoned content writer specializing in keeping readers engaged with the insurance industry, term and life insurance developments, etc. With an experience of 2 years in insurance and HR tech, Himanshu simplifies the insurance information and it is completely visible in his content pieces. He believes in making the content understandable to any common man.
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