Term Plan Return of Premium

Term Insurance is a simple life insurance plan that provides financial coverage in the form of a life cover for a fixed period and helps cover the expenses of your family in  your absence. While a basic term plan is highly beneficial for most buyers, a TROP(Term Return of Premium) offers benefits beyond that. TROP(Term Return of Premium) is a variant of term insurance that provides an additional feature of Survival benefit in addition to the life cover. Under this plan, policyholder receives back all the premiums (excluding GST) paid in case of survival till end of policy period.

However, one distinctive feature of the term insurance return of premium plan, which makes it different from standard term plan is that it offers the benefit of the return of premium as survival benefit to the insured person in case they survive the policy tenure.


How Does Term Plan with Return of Premium Work?

Consider a policy with Rs.20 lakh cover for 10 years for which the yearly premium is Rs.2,000. If the insured dies, the family will be paid Rs.20,00,000 (Sum Assured). However, if the insured survives the term, the insurer will return the entire premium amount, that is, Rs.20,000 (Rs.2000x10).

Technically, a term plan with a return of premium is a non-participating insurance plan.  Let’s take a look at some of the notable benefits of term insurance with the return of premium as compared to the pure term plan.

A term plan offers only death benefits whereas a term insurance return of premium plan offers the benefit of the return of premium as maturity benefit after the completion of the policy tenure.

Because of this guaranteed “all premiums back” feature, the premium rate of the TROP plan is higher than a pure term insurance plan.

Term Life Insurance Plans

Top Reasons to Buy Term Insurance Plan with Return of Premium
A Term plan with return of premium (TROP) is specifically designed for customers who want to provide financial security to their loved ones along with the benefit of returns. As the name suggests, Term Return of Premium offers the combined benefit of insurance coverage and return of premium. They give you peace of mind by providing financial security to the family in case something unfortunate happens. Also, the plan offers an assured premium return, which means total premiums paid during the tenure of the policy are paid back to the policyholder.  

Let’s take a look at the top reasons why you should consider purchasing a term plan with a return of the premium policy.

Term insurance with a return of premium offers a premium refund on the maturity of the policy. In case the insured survives the entire tenure of the policy, then they are eligible to receive the total amount of premium invested towards the plan on completion of the policy term. This makes the plan ideal for investors who want to have insurance cover along with the benefit of a premium refund on maturity.

Term plan with return of premium provides assured returns on the total amount of premiums paid. Term plan return of premium guarantees that the insured person will get their money back. The policyholders do not have to worry about their money not being returned to them.

The term insurance return of the premium plan offers the option of rider benefit to enhance the coverage of the policy. Most insurance companies offer a range of optional riders that insurance buyers can purchase. These can be taken at the time of signing up for the policy or added later. It is better to take the riders such as personal accident, physical disability, etc. at the time of taking the policy as they offer a comprehensive cover right from the time of signing up for the term insurance with return of premium plan and that too at a very low additional cost.

Offers tax benefits as per the prevailing tax laws. Currently, the premium paid and the amount drawn are tax-free under Section 80C and 10 (10D) of the Income Tax Act, 1961. The tax exemption is applicable up to the maximum limit of Rs.1.5 lakh.


Who can Avail Term Plan with Return of Premium?

The minimum entry age offered by the term plan with return of premium is 21 years whereas the maximum entry age offered by a term insurance plan with return of premium is 55 years. Apart from the many other factors, the premium rate of the policy is determined as per the age of the insurance buyer. Overall term plan with return of premium can be purchased by all individuals irrespective of whether they are single, married, or married and have kids. An individual can easily buy an online term insurance plan after comparing it with other available policies of interest. 

Tenure of Policy

Unlike traditional insurance plans that may provide a cover that lasts for the lifetime, a term plan with a return of premium lasts for only a certain period such as 10, 15, 20, 25, or 30 years. Most of these plans have a maximum maturity age below 70 years though some insurers provide cover even beyond 70 years.