- Enhance Your Cover
- Covered Diseases Under CI Rider
- How to Buy CI Rider
Term Insurance with Return of Premium (TROP)
Term insurance is a popular choice among Indian buyers because it allows policyholders to obtain a large sum assured at an affordable premium. While a basic term plan might give you lifelong annuities, guaranteed returns for critical illnesses, or different payout options, a term plan with a return of premium plan levels up the plan perks beyond your expectations.
There's only one difference between a basic term plan and a term plan with a return of premium, which is the survival benefit. It is the variant of a term insurance plan that provides payback of the premium paid towards the plan to the policyholder at the end of the policy tenure. Under this plan, the insurer gives the policyholder the survival benefits (minus GST) once the policy matures
Some additional benefits associated with TROP include partial or full disability benefits, accidental death benefits, and guaranteed protections against critical illnesses.
What is a Term Plan with Return of Premium (TROP)?
As mentioned above, a basic term plan or term plan with a return of premium is quite similar, and they both provide a life cover to the insured person's family members. However, the maturity payout is one feature that sets TROP apart from the regular term plan. Under this plan, the policyholder can receive a return of the premium amounts at the end of the term. It's clear that TROP can bring a sense of overall protection with dual benefits under a single-term plan.
Top Term Insurance with Return of Premium Plans in India
|
Insurance Providers
|
Best Term Plans
|
Claim Settlement Ratio (CSR)
|
Entry Age
|
Maturity Age
|
Check Plans |
| ICICI Prudential life insurance | ICICI Pru iProtect Return of Premium | 97.82% | 18 to 65 years | 85 years | |
| Max Life Insurance | Max Life Smart Secure Plus Plan | 99.34% | 18 to 65 years | 85 years | |
| Bajaj Allianz Life Insurance | Bajaj Allianz Life eTouch Online Term | 99.02% | 18 to 65 years | 75 years | |
| PNB MetLife Insurance | PNB MetLife Mera Term Plan Plus | 97.33% | 18 to 65 years | 99 years | |
| Canara HSBC Life Insurance | Canara HSBC iSelect Smart360 Term Plan | 98.44% | 18 to 65 years | 81 years | |
| Aditya Birla Sun Life Insurance | ABSLI DigiShield Plan | 98.07% | 18 to 65 years | 55 years |
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 basis of the 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 back the premium paid towards the plan to the Bhanu so that he will get Rs. 7,00,000 (14,000 x 50) upon maturity of the policy.
Why Should You Choose A Term Plan with Return Of Premium Option?
The cost of living has suddenly increased in the past few years, placing a strain on people's wallets. However, a term plan with a return of premium option is an efficient way to manage finances and obtain life security. It is among the popular choice among prospective policyholders because it offers survival benefits, making it an excellent choice. It also provides additional benefits with add-on riders, including waiver of premium, accidental death benefit, disability benefit, and protection against critical illnesses.
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.
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 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.
Pure Term Insurance vs Return of Premium - A Quick Comparison
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.
| 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 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.
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
4209-1730875091.webp)
Share your Valuable Feedback
4.6
Rated by 861 customers
Was the Information Helpful?
Select Your Rating
We would like to hear from you
Let us know about your experience or any feedback that might help us serve you better in future.
Written By: Varun Saxena
I am a passionate content writer with over three years of experience in the insurance domain. An avid learner, I always tries stays ahead of the industry's trends, ensuring my writing remains fresh and includes the latest insurance shifts. Through my work, I strive to engage with targeted insurance readers.
Do you have any thoughts you’d like to share?