Term Insurance with Return of Premium: Benefits, Features & More

Picture this: You shell out a hefty chunk of premium every year, probably for 25 to 30 years (depending on your policy term), often wondering, "If I survive the policy term, all this money I paid for these many years is lost". Back to reality: Now, you can swap that concern for a smile. Some term insurance plans return every penny you paid if you outlive the policy term. This insurance product is called Term Insurance with Return of Premium (TROP).

Read on to get clarity on what a TROP plan is and whether it is worth its salt in India.

Term Insurance with Return of Premium - What is it All About?

Term insurance with return of premium is a term plan variant that offers the classic death benefit with an added advantage. It returns all premiums to the beneficiary after maturity if the policyholder is absent during the policy term. So, it is almost like accumulating your savings in an insurance wrapper.

How Does TROP Plan Work - An Example!

You paid your premiums on time for the entire policy duration, say for 20 to 30 years. In your absence during the term, your beneficiary or nominee will get the sum assured and the add-ons (if any). Otherwise, you will receive all the premiums back minus the taxes.

For example, if you invest INR 35,000 annually for 20 years in a TROP plan of INR 1 crore, you will receive INR 7 lakhs upon maturity.

Term Insurance with Return of Premium - The Perks

There are several benefits of term insurance with return of premium. Let’s take a look at the following pointers:
Assured Return of Premiums: TROP policies combine protection with a sense of financial assurance. When people plan to buy a term insurance plan, most are concerned about two things: "What if I pay all these years and nothing comes back?” and “It feels wasteful if I don’t 'use' the insurance.”  A return of premium term plan bridges the gap between pure risk cover and savings with its zero “loss” on survival approach.

Comprehensive Life Coverage: One of the biggest benefits of TROP is that it offers full life coverage. If the policyholder (you) passes away during the policy term, a large amount of money is given to their nominee. This helps the family maintain their lifestyle and manage expenses without financial stress.

Financial Commitment: It induces a sense of financial discipline. The money-back feature at the end of the policy term helps people stay more disciplined and committed to their finances. It also encourages them to keep the policy for a longer time and stay protected.

Tax Benefits: There are dual tax benefits in TROP. The premium paid under TROP allows the tax deduction up to  1.5 lakh under Section 80C of the Income Tax Act. Secondly, the return you receive as 'refunded premiums' at the end of the policy term is also tax-free under Section 10(10D).

The best TROP plans offer additional benefits such as riders or add-ons to enhance your coverage. For example, you can opt for a critical illness rider and get a lump sum amount in return if diagnosed with a serious illness. Choosing a waiver of premium rider could be a second option, which means you would not have to pay future premiums if you face any health issues or disabilities. These riders give you extra support during tough times without affecting your savings or insurance benefits.

Term Insurance and Term Insurance with Return of Premium - What’s the Difference?

There are two main types of term insurance:

1. Pure Term Insurance – It only gives money to your family in case of your demise during the policy term.
2. Term Insurance with Return of Premium (TROP) – It also gives money to your family in your absence, but if you survive the policy term, you get back all the premiums you paid.

Let’s look at the main differences between plain term insurance and TROP with the help of the table below:

TROP Plan - Final Thoughts!

Term Insurance with Return of Premium is not a money-making policy. It is more about how it makes you feel - financial psychology. Many people dislike the idea of paying for insurance and getting nothing in return if they do not use it. TROP policy solves that by giving your money back if you live through the policy term.

But keep in mind! You will only get back the money you paid, not any extra profit. So, if you want to grow your money, you will still need to invest separately. Therefore, ask yourself: "Do you want insurance just for protection, or do you also want your money back later"?, and purchase accordingly!

FAQs on Term Insurance with Return of Premium