Have you ever considered an insurance plan that safeguards your loved ones’ future and promises a premium return if you outlive the policy term? Enter the world of Term Insurance with Return of Premium (TROP) - a unique financial shield that offers the security of traditional term insurance coupled with a rewarding twist.
This financial product combines the affordability of term insurance with the added advantage of receiving premiums back at the end of the policy term. In this article, we will explore its features and benefits, drawbacks, and why it might just be the ideal blend of protection and prosperity for your family's future.
What is Term Insurance with Return of Premium (TROP)?
Term insurance with return of premium is a type of term insurance plan that combines the benefits of term life insurance with a savings element. Unlike standard term life insurance, where premiums are paid for a specified term, and the coverage expires if the policyholder survives the term, TROP offers a distinctive feature - the return of premiums paid if the policyholder outlives the policy term. Term insurance with return of premium plan also offers death benefits to the policyholder’s nominee in case of death.
How Does Term Insurance Plan with Return of Premium Work?
Here’s how a Term Insurance with Return of Premium plan typically works:
- Similar to regular term life insurance, TROP provides coverage for a specified period, often ranging from 10 to 40 years. This period is chosen by the policyholder based on their financial needs and obligations.
- Policyholders pay regular premiums throughout the chosen term. These premiums are generally higher than those for pure term insurance, reflecting the additional feature of premium return.
- If the policyholder survives the entire term, they are eligible to receive back all the premiums paid over the policy duration. This acts as a savings component, making TROP an attractive option for individuals who want to ensure their loved ones are financially protected while also potentially benefiting from a premium refund.
- In the unfortunate event of the policyholder's demise during the coverage period, the plan pays out the death benefit to the nominee. This lump-sum amount is designed to provide financial support to the family and cover any outstanding liabilities.
- If the policyholder survives the term, they receive the return of premiums as a lump sum. This can be used for various purposes, such as funding retirement, meeting financial goals, etc.
Features of Term Insurance with Return of Premium Plan
Term Insurance with Return of Premium (TROP) plans come with several features that set them apart from standard term life insurance:
- Premium Refund on Survival: One of the primary features of TROP is the return of all premiums paid if the policyholder survives the entire term. This feature acts as a savings component, providing a financial cushion for policyholders who outlive the policy term.
- Affordable: Premiums for TROP plans are slightly higher than those for regular term insurance due to the return of premium features. However, the premiums paid for TROP are returned as maturity benefits and are exempted from taxation.
- Fixed Premiums: TROP plans typically come with fixed premiums throughout the policy term. This allows policyholders to plan their budgets effectively without worrying about premium fluctuations.
- Premium Payment Options: You can select the suitable sum assured amount under the term plan with a return of premium. Moreover, you can also choose the right premium payment option from single pay, limited pay, regular pay, or pay till 60 options as per your requirement.
- Surrender Value: After purchasing the term plan with a return of premium, if you decide to discontinue premium payments or surrender the plan, you will get a surrender amount. The surrender value of the Term Insurance with Return of Premium (TROP) plan depends on specific conditions, varying according to the chosen premium payment option:
- For TROP with a Single Premium variant, the surrender value becomes applicable after the payment of a single premium.
- In the case of TROP with Limited Pay variant and Regular Pay variant, the surrender value becomes applicable upon the payment of premiums for two full years.
Benefits of Term Insurance with Return of Premium Plan
Here are the key benefits of opting for a Term Insurance with Return of Premium (TROP) plan:
- Death Benefit: TROP plans provide a death benefit, ensuring that your loved ones receive a lump-sum amount in the unfortunate event of the policyholder’s demise during the coverage period. This financial cushion helps cover immediate expenses and provides ongoing support.
- Tax Benefits: Premiums paid for TROP plans are often eligible for tax benefits under Section 80C, 10(10D) of the Income Tax Act. This provides an additional incentive for individuals looking to optimise their tax liabilities.
- Return of Premium Benefit: Term insurance with return of premium (TROP) provides a return of all premiums paid if the policyholder survives the entire term. This ensures that, in case of survival, the policyholder receives a refund of the total amount invested in premiums.
- Rider Benefits: Term Insurance with return of premium plans offers various riders in addition to the base cover. These riders can be added to enhance the overall coverage and tailor the policy to specific needs. The common rider benefits that individuals may consider adding to a TROP plan are critical illness benefit rider, Accidental Death and Disability Rider, Waiver of Premium Rider, Accidental Death Benefit Rider, and more.
Best Term Insurance with Return of Premium Plans in India
| Company Name |
Plan Name |
Entry Age |
Sum Assured |
|
| Max Life Insurance Company |
Smart Secure Plus Plan |
Minimum 18 Years to Maximum 65 Years |
Rs.25 Lakhs to Rs.10 Crore |
Buy Now |
| HDFC Life Insurance Company |
Click 2 Protect Super Plan |
Minimum 18 Years to Maximum 65 Years |
Rs.50 Lakhs to Rs.20 Crore |
Buy Now |
| Bajaj Life Insurance Company |
e-Touch Plan |
Minimum 18 Years to Maximum 55 Years |
Rs.50 Lakhs to Rs.10 Crore |
Buy Now |
| Kotak Life Insurance Company |
e-Term Plan |
Minimum 18 Years to Maximum 65 Years |
Rs.51 Lakhs to No limit |
Buy Now |
| ICICI Prudential Life Company |
iProtect Plan |
Minimum 18 Years to Maximum 60 Years |
Rs.25 Lakhs to Rs.10 Crore |
Buy Now |
| TATA AIA Life Insurance Company |
Sampoorna Raksha Supreme Plan |
Minimum 18 Years to Maximum 60 Years |
Rs.1 Lakh to No limit |
Buy Now |
You can use Term Insurance with Return of Premium Calculator provided by PolicyBachat for precise calculations based on individual circumstances.
Who Can Buy Term Life Insurance with Return of Premium Plan
When purchasing term insurance with return of premium plan, each person has different objectives. TROP can be a beneficial choice for people who fall under the following categories:
- Unmarried: Even if unmarried, one may have financial responsibilities like supporting ageing parents or servicing any outstanding debts. TROP can ensure that the premiums paid are returned if the policyholder survives the term, offering financial flexibility.
- Married with No Children: Even without children, spouses may depend on each other’s income. TROP ensures that if one spouse passes away during the term, the surviving spouse will receive the death benefit. If both survive, the premiums are returned.
- Married with Children: With dependents, it's crucial to have life insurance to provide for the family's financial needs in case of an untimely demise. TROP ensures the family receives a lump sum amount and if the policyholder survives, they get the premiums back. TROP can be a way to secure funds for children's education if the policyholder survives the term. The returned premiums can contribute to educational expenses.
How to Buy Best Term Insurance Plan with Return of Premium Online
Following are the steps to purchase the Term insurance with return of premium plan (TROP) online:
Step 1: Visit the ‘PolicyBachat website and click the ‘Term’ tab.
Step 2: In the next step enter the details below clearly and correctly.
- Gender of the applicant
- Tobacco consumption; Yes or No
- Annual income from the options given in the calculator
- Occupation type; Salaried or Self Employed
- Age of the applicant to be entered as Date of Birth
- Name of the applicant and email id of the applicant.
Step 3: In this step, you can edit your requirements such as: -
- Sum Assured Amount
- Tenure - maximum age at the coverage is required
- Premium Payment Type - Regular Pay, Single Pay, Limited pay
- Premium Payment Frequency – Monthly, Quarterly, Half-yearly or Yearly
- Payout Type – Return of Premium Option
- Add-ons - Critical Illness, Waiver of premium, Accidental disability, etc.
Step 4: In this step,compare different types of term insurance plans with return of premium options and their premiums and features displayed on the screen. Then select the plan which is appropriate to your needs and budget. Then make payment via online payment method.
Pure Term Insurance Vs Term Insurance with Return of Premium
| Features |
Pure Term Insurance |
Term Insurance with Return of Premium (TROP) |
| Death Benefit |
Provides a lump-sum amount to beneficiaries in case of the policyholder’s demise during the coverage period. |
Offers a death benefit like pure term insurance with the added feature of return of premiums upon survival. |
| Premiums |
Premiums are lower compared to TROP. |
Higher premiums due to the added feature of premium return. |
| Savings Component |
No savings or cash value component. It purely provides a death benefit. |
Acts as a forced savings tool, providing the return of premiums as a lump sum if the policyholder outlives the term. |
| Long-Term Financial Security |
Ideal for individuals focused solely on risk mitigation and financial protection to beneficiaries. |
It is suited for those who want a combination of insurance and savings elements for future financial goals. |
| Tax Benefits |
Premiums paid are generally eligible for tax benefits under Section 80C. |
Premiums are typically eligible for tax benefits under Section 80C, adding to the overall tax advantage. |
| Premium Payment Options |
Typically offers regular premium payment options. |
It offers various premium payment options, including single pay, limited pay, and regular pay variants. |
| Policy Term |
Policy terms range from 10 to 40 years. |
Policy term range from 10 to 40 years, providing flexibility in choosing the duration of coverage. |
Real Life Case Scenario
Kamal and Sunitha, both aged 30 -Years, and non-smokers are looking to purchase life insurance policies to secure their family's financial future. They are considering a 20-year policy term with a sum assured of Rs. 1 crore. Kamal opts for Term Insurance with Return of Premium Plan with a 20-year term and a sum assured of Rs. 1 crore. The annual premium for this policy is Rs. 25K (Approximately). Sunitha chose a Pure Term Life Insurance Plan with a lump sum payout option for a 20-year term and a sum assured of Rs. 1 crore. The annual premium for this policy is Rs. 10K (Approximately).
Comparison of Pure Term Insurance vs Return of Premium Term Insurance
Premium Payments:
- Kamal pays Rs. 25,000 annually for 20 years, a total of Rs. 5 Lakhs over the policy term.
- Sunitha pays Rs. 10,000 annually for 20 years, a total of Rs. 2 Lakhs over the policy term.
Policy Benefits:
- If Kamal survives the 20-year term, he will receive a refund of all premiums paid (excluding GST).
- If Sunitha survives the term, there is no maturity benefit in the traditional policy; it offers pure life coverage.
Risk Coverage:
Both Kamal and Sunitha have a sum assured of Rs. 1 crore, ensuring that their families receive this amount in case of their unfortunate demise within the policy term. Kamal’s ROP policy guarantees a refund of all premiums paid (excluding GST) if he survives the term, essentially acting as a form of savings or investment. Sunitha’s traditional policy doesn't offer a premium refund but provides higher life coverage for a lower premium amount.
This case study illustrates how the TROP plan provides a mix of life coverage and savings, whereas pure term life insurance focuses primarily on life coverage. The choice depends on individual preferences, financial goals, and risk appetite. To make better decisions compare quotes online at PolicyBachat.
Conclusion
Opting for a Term Insurance with Return of Premium plan is a wise financial decision for individuals seeking both protection and a potential savings element. This innovative insurance product not only provides comprehensive coverage during the policy term but also offers a unique feature of returning the premiums paid at the end of the policy term if no claim is made.
This can be seen as a valuable way to safeguard one's family while also having the assurance of receiving a financial return in case the unexpected does not occur. It combines the security of pure term insurance with the added benefit of a potential financial reward, making it a prudent choice for those who prioritize both financial protection and future financial flexibility.
As with any financial decision, it is crucial to carefully review the terms and conditions of the policy and compare quotes online at PolicyBachat to ensure that they align with individual needs and goals. Ultimately, a Term Insurance with return of Premium plan stands out as the best product for both the present and future financial well-being of policyholders and their loved ones.