Term plan with return of premium also known as TROP is a variant of term insurance plan, which is specifically designed to cater to the requirements of the insurance seekers. Like any other standard term insurance plan, term insurance return of premium plan also provides financial protection to the family of the insured against any type of eventuality.
However, one distinctive feature of 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 he/she survives the policy tenure.
In order to help you know more about term plan with return of premium , further here we have discussed it in detail.
Consider a policy with Rs.20 lakh cover for 10 years for which the yearly premium is Rs.2000. If the insured dies, the family will be paid Rs.20 lakh (sum assured). However, if the insured survives the term, the insurer will return the entire premium amount i.e. Rs. 20,000 (Rs.2000x10).
Technically, a term plan with return of premium is a non-participating insurance plan. Let’s take a look at some of the notable benefits of term insurance with return of premium as compared to the pure term plan.
A Term plan with return of premium 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.
Firstly, they give you peace of mind by providing financial security to the family in case something unfortunate happens. Secondly, 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 return of premium policy.
Your premium is decided on age at which you buy the policy and remains same, throughout your life
Premiums can increase between 4-8% each year after your Birthday
Your policy application could be rejected or premiums increase by 50-100%, if you develop a lifestyle disease
Term plan with return of premium, also known as TROP, is different from term plan as they provide maturity benefit as a premium return in addition to the death benefit.
Here we have discussed in details the features of Term plan return of premium.
The sum assured in term insurance with return of premium plans refer to the life insurance cover that is offered by the insurer to the insured person at the time of signing up for the plan. Term insurance return of premium offers a lower sum assured amount as compared to the pure term insurance policy, as the premium amount refunded
The survival or maturity benefits offered by a term plan with return of premium is what makes it different from a traditional term policy. Under a pure term plan, the insured person does not receive any survival or maturity benefits. However, under a simple TROP plan, the insured gets back all the money they had invested as the premium for the plan less any taxes.
The term a plan with return of premium offers death benefit as the total sum assured amount to the nominee in case the insured person demise due to any eventuality. Different insurance companies’ offers the sum assured amount depending on the plan or mode of premium payment or the type of cover opted.
The surrender value of the term plan return of premium plans generally varies depending on the payment option. As a rule, the surrender value is generally more for single premium plans where the entire premium for the policy is paid at the beginning of the policy period. Insurers will have different ways of calculating the surrender value and people who are looking at TROP plans should make sure they know what they are getting as the amount they may receive will probably not be what they assume they will receive.
This is a benefit that may be provided under a term plan with return of premium. Under this, as mentioned earlier, the plan continues if the policyholder is unable to pay the premium, though with a lower cover. Most companies require the policyholder to pay the premium for a minimum number of years before they offer this benefit.
Insurance companies offer various riders in addition to the principal cover. These generally include:
The minimum entry age offered by the term plan with return of premium is 21 years whereas; the maximum entry age offered by 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.
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Unlike traditional insurance plans that may provide a cover that lasts for the lifetime, a term plan with 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.
|Pure Term Insurance Plan||Term Plan with Return of Premium (TROP)|
|Known as a pure protection plan, it is the simplest form of life insurance product.||Term insurance return of premium is a variant of term insurance plan|
|In a pure term plan, the insurance coverage is offered only as a death benefit.||Term plan return of premium offers insurance coverage as death benefit along with the benefit of the return of premium as survival benefit in case the insured survives the entire tenure of the policy.|
|In pure term insurance plan, the sum assured amount offered to the policyholder is 10 times the annual premium paid.||On the other hand, Term plan with return of premium offers comparatively lower sum assured amount to the policyholder.|
|The premium rate of a traditional term insurance plan is very affordable.||The premium charged by Term Return of Premium is considerably higher.|
|Offers the benefit of tax exemption under section 80C of the Income Tax Act.||Term plan with return of premium also offers the benefit of tax exemption under section 80C of the Income Tax Act.|
|A term plan is best suited for an individual who wants to provide financial protection to their family.||Term insurance return of premium is best suited for individuals who don’t mind gaining some returns along with the benefit of insurance coverage.|
Our insurance experts at PolicyBazaar have come up with handy tips to smoothen your insurance buying journey.
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