Term Plan Return of Premium

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.

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.

Features of Term Plan with Return of Premium  

A term plan with a return of premium, also known as TROP, is different from a term plan as they provide maturity benefit as a premium return in addition to the death benefit.

Here we have discussed in detail the features of the Term plan return of premium.

1. Sum Assured

   The sum assured in term insurance with return of premium plans refers 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

2. Survival Benefits or Maturity Benefits

   The survival or maturity benefits offered by a term plan with a 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. 

   Why buy Term Insurance early?

   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

   See how age affects Term Insurance Premiums

   See how age affects Term Insurance Premiums

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3. Death Benefits

   The term 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 offer the sum assured amount depending on the plan or mode of premium payment or the type of cover opted for.

4. Surrender Value

   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.

5. Paid-Up Value

   This is a benefit that may be provided under a term plan with a 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.

   

6. Riders

   Insurance companies offer various riders in addition to the principal cover. These generally include:

   1. Personal Accident or Disability Rider

      This provides a certain benefit if the insured is involved in an accident that may cause injuries, disabilities, or even death

   2. Critical Illness Rider

      This rider covers certain illnesses such as heart attacks, stroke, cancer, and certain cardiovascular surgeries, and so on. The number of illnesses covered by different companies varies and people should ensure they take note of the ones the rider covers before they opt for it. 

   3. Hospital Cash

      This rider provides certain cash benefits in case of hospitalization due to certain pre-defined reasons.

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. 

Term Plan with Return of Premium Vs Pure Term Insurance Plan

Term Insurance Plans generally come in 2 variants: Pure term insurance plan and Term Plan with Return of Premium i.e., TROP. Both insurance products are ideal and have different goals. The one that you opt for would depend on your specific requirement. In some cases, people think that they will receive returns by investing in any financial products. However, that is not the case for all term plans. Let’s discuss the difference between Term plan and TROP in detail: 

Wrapping It Up! 

Term insurance plans offer attractive life coverage at low premium rates. Having a Term Insurance with a Return of Premium plan can guarantee the policyholder to get back the premiums. We have also discussed the difference between a pure term insurance plan and a Term Insurance with a Return of Premium plan. Choose a plan that suits your needs and get yourself insured now.