Term with Return of Premium Plans:
TROP plans are a variant of Term/ Pure Protection plans with most of the features being common between the two plans. TROP plans come with an added advantage of income replacement along with the benefit of premium refund at maturity if the sum assured was not paid to the nominee within the policy term.
Advantages of buying Term with Return of Premium Plans:
Term with Return of Premium life insurance plans provide dual benefit. Firstly, they are cost effective and have lower premiums when compared with investment plans as well as they give you peace of mind by providing financial security to the family in case something unfortunate happens. Secondly the plan also offers premium return, which is guaranteed for all the premiums paid during the tenure of the policy.
Top reasons to buy TROP plans:
- It is a low cost, low risk insurance plan.
- It offers premium refund at maturity. So you do not lose premium paid over the years.
- Most of the TROP plans offer guaranteed returns on the premium paid (excluding extra premiums and rider premiums, if any) along with return of premium option.
- The option to add riders makes it attractive as it becomes a complete protection plan which can be relied upon in case of unfortunate extremities of life
- It also offers tax benefits as per the prevailing tax laws. Currently, the premium paid and the amount drawn are tax free under section 80 C and 10 (10D) of Income Tax Act, 1961.
- It works on level premium concept which means the premium remains constant once bought, unless lapsed i.e. contract broken. This makes it a must buy at an early age to enjoy the benefits at all life stages.
Technically, a Term with Return of Premium plan is a non participating term assurance plan. When compared with a term plan the following features are notable.
- Term plan offers death benefit only whereas a TROP plan has maturity benefit as well
- Because of this guaranteed “all premium back” feature, it is slightly higher priced than a term plan
What to consider?
- Level of protection required (risk cover)
- Existing levels of cover
- Present health state
- Financial liability assessment
Important Elements of Term Return of Premium Life Insurance Plans :
Life Assured is the person whose life risk is covered under the plan. For TROP plans Life assured is essentially the proposer as well (in general cases).
Age of the Life Assured decides the risk and thus becomes one of the important parameters for deciding the premium. The sooner you get insured, the lower the risk premium and better the chances of getting higher cover amount. Lifestyle has an impact too, a smoker possesses higher risk than a non smoker.
Policy Term is the years for which the protection is opted for. Generally available for 15- 20 years, it gives an option to get a cover till the age of 65- 70 years.
Premium payable works on level premium concept and thus remains the same throughout the policy term unless the contract is broken in between.
Death Benefit or the Sum assured is the life cover chosen by the individual and agreed upon by the insurer based on their underwriting guidelines. It becomes payable to the nominee in the unfortunate event of death of the life assured/ person insured. The eligibility depends upon the financial worth of the individual.
Maturity Age is the age of the life assured at which the policy matures and the maturity benefit becomes payable to the life assured.
Maturity benefit is the amount payable to the life assured/ proposer at maturity of the plan. The plan essentially returns the premium paid during the term. Various insurers have additional guaranteed benefits added onto it. For example: Metlife Met Suraksha TROP guarantees 10% of premium added to the base premium paid.
Comparison of Available Options for TROP Plans
Helps in choosing the best available in the market. PolicyBazaar.com comparison and plan selection tip:
- Do not consider only the maturity benefit while selecting the insurer. The ones offering higher return might not be the most cost effective.
- Selection of Higher Sum assured has discount offers and thus a better proposition.
- Go for highest term available under plans on offer; the policy term is not extendable later.