Term Insurance Return of Premium
Indeed, there is a conscious awareness of the significance of the term insurance in the market. The breadwinners of the family are aggressively seeking knowledge and carefully buying term insurance plans that promise to pay the insured's family post his/her unfortunate demise to cater to their financial needs.
However, when it is said that life is uncertain and no one knows about the future, some aspiring policyholders meanwhile raise a question that what will happen to their term insurance if they complete the policy tenure. What will they get if they outlive their policy duration or etc.? No one wants to see their money going into vain just because they have survived their term insurance policy tenure. Here, Term Insurance Return of Premium comes into play as an answer to these queries.
Term insurance Return of Premium (TROP) is a nature of term insurance that works on similar lines but with an additional benefit i.e. survival or maturity benefit, whatever you may call it. As per the TROP, the policyholder is entitled to get the entire premium paid during the policy tenure return. This means that the Term Insurance Return of Premium offers dual benefits to the insured i.e. protection for family members as well as the return of premium that can be utilized by the insured. Hence, this becomes an ideal term insurance variant for people who are looking for some kind of return on their insurance plan.
Talking about some basics of Term Life Insurance with Return of Premium, there are some differentiating factors. Since the TROP comes with an additional benefit, the premium charged for this plan is comparatively higher than the regular term insurance policy as the policyholder is guaranteed to get the entire premium amount return.
Next is the tenure of this life insurance with premium return benefit as these plans come with a fixed duration such as 10, 15, 20, 25, and 30 years. Moreover, many such plans have maximum maturity age below 70 years, unlike traditional term life insurance policies.
Know More About: Term Life vs. Traditional Life Insurance- Which Is Better?
Let's Simplify TROP with Example
Mr. Bhatia, a 30-year-old man living a healthy life with good habits, buys a Term insurance Return of Premium for INR 50 Lakhs. His payable premium comes at INR 12,718 annually for 40 years of duration i.e. the maturity of the policy.
Now, there will be situations here. The first situation is that if Mr. Bhatia passes away within the policy duration, then his family or the nominee mentioned in the plan will be given INR 50 Lakhs i.e. sum assured committed in the plan.
The second situation is that Mr. Bhatia outlives the policy tenure then he will be eligible for a survival benefit and receive INR 5,08,720 i.e. 12718 x 40 as per the Term Insurance Return of Premium plan.
Term Insurance Companies
Check and compare plans from 21 IRDAI-approved term insurance providers before purchasing a term plan.
Should you buy Term Insurance 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 that who should take the Term Insurance Return of Premium plan.
- Unmarried If a person is single with no dependents or responsibilities such as wife or kids then Term Insurance with 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 maturity benefit can help them in surviving that crucial time.
Benefits of Term Insurance Return of Premium
As insurance plans are specifically chosen on the basis of their benefits, then Term Insurance Return of Premium also offers a set of advantages to the insured, such as:
Death Benefit
Like a standard term insurance plan, Term Insurance Return of Premium offers a death benefit where the sum assured amount is given to the nominee assigned by the policyholder.
Survival Benefit/Maturity Benefit
This plan stands unique with this differentiating factor. Term Insurance Return of Premium allows the survival benefit or popularly known as maturity benefit where the policy is returned the entire premium amount during the policy.
Tax Benefit
Investing in Term Insurance with Return offers a proposition to save tax under 80C of the Income Tax Act, 1961 where the premiums paid for the policy are eligible for tax deductions of up to Rs. 1.5 lakhs per annum. Additionally, the sum assured payout to the beneficiary is exempted from income tax under Section 10 (10D) of the tax laws
Surrender Value
Term Life Insurance with Return of Premium gives 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.
Here is the comparison between Standard Term Insurance & Term Insurance Return of Premium
| Standard Term Insurance | Term Insurance Return of Premium |
| Being a complete protection plan, it only offers the death benefit | Being an advanced variant, it offers death + survival benefit |
| The premium rate is pretty affordable | The premium rate is comparatively higher |
| Sum assured offered to the insured is 10 times of annual premium | Sum assured offered to the insured is comparatively lower |
Final thoughts
Term Insurance with Return of Premium is a great option for the people who are looking for protection for their families as well as an investment plans for themselves. Thus this plan gives a complete win-win situation to the policyholder by giving one or another benefit.
