Term Insurance Return of Premium (TROP)

Embedded with all the benefits of simple term plan, TROP offers income replacement and premium refund at maturity. Compare these cost effective plans at PolicyBazaar before zeroing in on one plan.

How Term Return of Premium Life Insurance Plans Work?

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 term assurance plan. When compared with a term plan following features are notable:

  • Term plan offers only death benefits 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

Top Reasons to Buy TROP Plans

There is a one segment of customers who expect to get returns from an insurance policy. To cater to this section, companies have launched TROP plans. This type of term plan provides the dual benefit. 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.

According to certified financial planners at PolicyBazaar, below are some top reasons to include TROP plans in your ambit.

  • Offers premium refund at maturity if a policyholder survives the tenure. So you don’t lose premium paid over the years. This makes the plan ideal for investors who are looking for term policy insurance covers but are not very keen on not receiving money back. As such, the term insurance return of payment plans try to get the best of both worlds – the large cover of term plans and the savings aspect of traditional plans such as endowment plans.
  • Provides assured returns on the total amount of premiums paid, which excludes additional premium(s) for enhances coverage with rider, (if any). Term insurance return of payment plans guarantee that the insured party will get their money back. The policyholders do not have to worry about their money not being returned back to them. Moreover, taking on additional riders that help build up savings means that the insured person may actually get back more than what they invested in the term insurance return of payment plan.
  • Optional riders that can be added handily for enhanced protection, making the plan offer comprehensive protection to the family, in case of unfortunate death of the policyholder.. Most insurance companies offer a range of optional riders that the insured party can take in addition to the term insurance return of payment policy. 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 return of payment policy, and that too at a very low additional cost.
  • TROP plans offer more premium payment options like yearly, monthly, etc. Term insurance return of payment plans offer an individual the option to choose the payment option which suits them best. For instance, if the policyholder is starting out on his career or has other considerations to take care of, then the single payment options are the best as they are smaller amounts and have a lower impact on the outflow than the higher amounts that need to be paid if the quarterly, half-yearly or annual payment options are chosen. On the other hand, if the insured individual can make the payment, then opting for the annual payment option is the best as the overall outgo is lesser than the other alternatives in the term insurance return of payment plan.
  • Offers a ‘paid up’ option if you default on payment of premium. This feature makes these policies ideal for people who do not have a regular income but still need a policy that takes care of their needs.
  • 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. The Income Tax Act offers a deduction up to Rs. 1.5 lakh if the sum is invested in the right vehicle. Conservative policyholders can use the premium they have paid for the term insurance return of payment plan to considerably reduce their tax liability.
  • Works on the level premium concept that requires paying a fixed premium amount, except the policy is lapsed. This particular feature makes this plan affordable and beneficial at different life-stages. The mortality tables used by the insurance companies provide a lower risk weightage to younger people. That is why the insurance premium is lower for people in the younger age group. The amounts gradually increase with age. Opting for a term insurance return of payment policy with a longer tenure when one is in his or her 20s means they have to pay the lower premium even when they are in their 30s or 40s.

Features of Term Insurance Return of Payment Plans

Term insurance return of payment policies, also called TROP plans, are different from term plans as they provide maturity or survival benefits in addition to the death benefits. Let us look at these features a bit more in detail so you can make a proper decision when you are looking for an insurance cover for yourself.

 

Sum Assured

The sum assured in TROP plans refers to the life insurance cover that the insured person receives when signing up for the plan. The sum assured under these plans is generally higher than what is available for the same amount of premium under the traditional endowment policies. This is because endowment policies provide returns that are higher than the term plans and may also provide the payout over a considerably longer period. TROP policies, on the other hand, just return the premium paid by the insured person over the tenure of the plan.

 

Survival Benefits or Maturity Benefits

The survival or maturity benefits for a TROP plan is what makes it different from a traditional term policy. Under a 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. In addition, in some cases, the insurance company may pay more than the premium paid provided certain conditions are met. For instance, Aviva Life Insurance Company offers a return of 110% or 10% return on the premiums paid in its Aviva i-Shield TROP plan. That means, assuming the person paid a premium of Rs. 39,000 per annum for 20 years, then he would get back Rs. 8,58,000 (Rs. 39,000 x 20 years x 110%) at the end of the 20 years.

 

Death Benefits

The term insurance return of payment policies offer the nominees the sum assured if the unfortunate comes to pass and the policyholder does not survive the tenure of the policy. Various insurance companies also offer a higher sum that may be calculated as the higher of the sum assured, the maturity benefit, or a certain percentage of the premium paid so far. The companies may offer more benefits depending on the plan or mode of premium payment or the type of cover opted. For instance, policies with regular premium payment options may also have the option to receive a death benefit that is certain times the annualised premium. Moreover, policies with optional riders may have certain additional benefits.

 

Payment Options

The insurance companies have launched various term insurance return of payment plans that offer flexible payment options. In most cases, the insured person can choose the payment option that suits them best. The standard payment periods are on a monthly basis, quarterly (i.e. every 3 months or 4 quarters in a year), half-yearly and yearly. Some insurers also provide a single premium payment option as well as giving the insured the choice to pay for only a few years (say 10 years) and get cover for a larger number of years (say 30 years). Each payment option has its own benefits. For instance, the monthly payments are smaller in size while the annual ones are obviously higher. The single premium or premium for only a part of the policy tenure are higher sums than the yearly payments but provide the assurance that once they are taken care of, the insured person will not have to worry again about the premium for the Term insurance return of payment plan.

 

Surrender Value

The surrender value of the TROP 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.

 

Paid Up Value

This is a benefit that may be provided under a TROP plan. 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.

 

Riders

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

  • 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
  • Critical Illness Rider: This rider covers certain illnesses such as heart attacks, stroke, cancer, 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. 
  • Hospital Cash: This rider provides certain cash benefits in case of hospitalisation due to certain pre-defined reasons.

Entry and Maturity Age

The entry and maturity age varies according to the policies that insurers provide. People looking to invest in a TROP plan should make sure that they get the cover the need up to the age they need. For instance, opting for a 20-year TROP policy at 50 years of age when the maximum maturity age is 65 years does not make sense. The person should opt for 15-year tenure if they want the TROP policy.

Tenure of Policy

Unlike traditional insurance plans that may provide a cover that last for the lifetime, a TROP plan 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.

Tips to Facilitate Easy Comparison of Available TROP Plans

Our insurance experts at PolicyBazaar have come up with handy tips to smoothen your insurance buying journey.

  • 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 these term plans on offer; the policy term is not extendable later.

We are not only an insurance portal and dedicated towards offering low-cost premium quotes but we also pride ourselves on offering top notch customer services. Our well-versed licensed agents will be happy to supply the information you need so that you choose the best term plan.

Some Term Insurance Return of Premium Plans

  • Aviva i-Shield Plan
  • Aviva LifeShield Advantage
  • AEGON iReturn Insurance Plan
  • ICICI Prudential Life Guard - Return Of Premium
  • LIC Jeevan Mangal Plan
  • PNB MetLife Suraksha TROP
  • Tata AIA Life Insurance iRaksha TROP

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