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.
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:
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.
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:
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.
Our insurance experts at PolicyBazaar have come up with handy tips to smoothen your insurance buying journey.
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What is life insurance?
Life insurance is a contract between the insurance company and the policyholder. In return for a premium, insurance company agrees to pay a particular amount to the policyholder or his/her beneficiary on the happening of certain events like death of the insured, critical illness and personal disability.
What is term insurance?
Known as a pure life cover, term insurance is the cheapest and simplest form of insurance. It is a pure risk cover and is determined by the sum assured. On the demise of policyholder, this pre determined amount is paid to the nominee.
Which are the traditional life Insurance instruments available?
Traditional Insurance products consist of Term Insurance, Term with Return of premium, Endowment, and Whole Life Policies. The cash value increases every year as you pay the premiums under these policies. Some traditional life insurance policies are participating, that means they offer bonus and dividend to their customers.
Why should you buy term insurance?
The need to buy term insurance varies from one individual to other, but the most common benefits which influence a person decision to buy a term insurance are as follows-
Secure your family- If you are the sole earner of your life, buying term insurance is indispensable for you. Term insurance offers monetary assistance to your family after your death. It means there would be no monetary burden on your family and they could carry on their normal lifestyle even if you are not around.
Safeguard against liabilities- In today’s time, we take a lot of liabilities to buy our home, new car and for meeting other expenses. Many of these liabilities are usually paid over a period of time (loans repayments). However, if something happens to you, responsibility of repaying liabilities falls directly on your family. A term insurance helps your dependents to manage your financial obligations.
Cost-effective- Term insurance plan is cheap. For instance, a risk cover of Rs 30 lakh for a male age 30 years can be as low as Rs 3000/year.
Tax benefits- Term insurance is a great tax saving instrument. By investing in plan, you will get deduction under Section 80C & 10(10D) of the Income Tax Act, 1956.
Additional protection options: Many term insurance plans comes with additional cover options in the form of riders such as Critical Illness, Accidental death or disability, Hospital cash etc. It’s easy to appreciate the need of these benefits with our current lifestyle habits.
How much risk cover should I bought?
How much risk cover you should buy primarily depends on your annual income. The general thumb rule says that risk cover should be 10 - 15 times of your annual income. It means if you are earning Rs 4 lakh/annum then you should buy a term cover of at least Rs 40 lakh. The idea is to arrange for self sustainability of dependents so that life style can be maintained and future needs could be settled after the demise of a policyholder.
This also depends on the age. Younger age people should and can buy higher cover – up to 25 times. This is because their dependents will take a longer time to be on their toes.
Should I buy a life insurance policy even if my employer has already covered me under group policy?
Yes, it is always advised to buy individual life insurance policy even if you are covered under a group policy because:
The amount of insurance you are covered for in the group policy may not be enough.
If you leave your job, you may no longer be covered under the group policy.
If you employer decides on cost-cutting then you run the risk of losing on the benefits of the insurance coverage.
As you age, the premiums are much higher & so is risk. If you decide to buy it later, you will end up paying higher amount. Insurance companies take extra precautions as well.
What documents will I need to buy term insurance plans?
Documents you need are:
Age proof (Voter’s ID card, Passport, Driving license, etc.)
Address proof (Voter’s ID card, Passport, Utility bills, etc.)
Photo identity proof (Passport, Voter’s ID card, PAN card, Driving license, etc.)
Recent passport size photographs
Income proof (Salary slip, Form 16, ITR etc.)
Some insurance companies might need specific documents apart from these.
What are the benefits of buying term insurance online at PolicyBazaar?
Buying online at PolicyBazaar is always advised. You can find a most effective plan by comparing all available options on a click of the mouse. When you buy insurance at PolicyBazaar, you make substantial savings because policy is directly sold to the person without the involvement of agent.
You can also upload all documents online and submit them to the insurer. There are various insurance policies which can only be bought online like SBI eShield, HDFC Click2Protect, ICICI Prudential iProtect etc. When a company specifically designs a product for online market, distribution cost is saved and the benefit is transferred to the policyholder. It is a general observation that the claim experience has been better for online customers.
Moreover, you can even compare different insurance policies online to see which plan suits you most. By entering basic details like name, age and type of policy intending to buy, you can get free insurance quotes on a click of the mouse.
What are the tax benefits on life insurance?
Life insurance is one of the most preferred investment avenues in India as it helps in tax planning. Following are the tax benefits one can avail by taking life insurance:
Premiums paid for all life insurance policies are exempt from tax up to a maximum of Rs 1.5 lakhs under Section 80C of the Income Tax Act, 1961.
The life insurance proceeds are not taxable for the deceased’s family under section 10 (10D).
What are the maturity benefits of term plans?
There is no maturity benefit attached with the term plans. Term plans will pay your beneficiary only in case of insured’s death. However, if you survive the term, nothing will be paid.
Term with Return of Premium option has maturity amount attached. Generally it pays back the premium on survival till end of policy term. Few plans add a certain percentage of interest on the premium. These plans are however costly.
What are the riders available in a life insurance policy?
Bought by the policyholder, riders are supplementary benefits added in the life insurance policy. However, you need to shell out extra money to get life insurance riders. Like insurance policies, premium paid on riders also give you tax benefits as per prevailing tax laws.
Various options of life insurance riders available in the market are-
|
Rider Options |
Coverage |
|
Term rider |
Additional life cover at a lower cost |
|
Accidental death benefit and partial/total disability benefit rider |
Pays in case of death or disability due to accident. On disability, a certain defined percentage is paid out. |
|
Waiver of premium benefit rider |
Future premiums are waived off on certain conditions. Most common being – Disability due to accident or illness etc. |
|
Critical illness benefit rider |
Pays a sum on occurrence of listed/ specified critical illnesses |
|
Hospital cash benefit rider |
Pays daily cash in case of hospitalization. |
|
Income benefit rider |
Pays monthly/ yearly income to nominee/family on death of policyholder |
|
Women specific rider |
Generally covers for critical illnesses specific to women. |
For how long should I buy term plan?
Term insurance plans are beneficial if they are bought for the longest duration possible. An insurance policy should cover the person till the age he intends to work. Also, late marriages and children at a high age mean responsibilities do not end at 60 years, which was earlier considered as a retirement age. Our financial experts at PolicyBazaar believe that a person needs coverage at least till 65 years, though it may vary as per circumstances. You should go for plans that offer you flexibility of fixing the tenure. For example, a businessman might have planned for extended earning years and therefore, it makes sense to buy income replacement plan.
When will my life insurance coverage start?
Your life insurance coverage will start only after the acceptance of your proposal form. Insurer will send a written confirmation regarding this. Policy kit is also sent across by the insurer.
Can I avail loan on term insurance plans?
No, you can’t avail loan on term insurance plans because these policies do not have maturity benefits.
How can I change my communication address?
You can get the changes done by visiting the branch office of your insurance company. A written communication is required. This can also be done via registered email id in case branch is not easily accessible. Few insurers allow the change through the customer portal.
Can I switch my term plan from one company to another if I get better benefits under other plan?
Term insurance portability is not yet available and hence one cannot switch from one insurance company to another but you can surrender your policy and buy a new plan with desired benefits. However, surrendering a term policy is not recommended because that will cost you a lot as the entire premium paid towards current plan will lapse without any return and the new policy which you will buy come at high cost since your age has increased.
In such a case, it is advised to continue with your current policy and buy another policy after declaring your current insurance plans, thus availing benefits of both the plans. For the plans bought offline, one can consider closing them down after analyzing cost difference. Generally online plans will be way cheaper with the age factor as well.
Will the term plan cover me if I am travelling abroad for business/leisure purpose?
Yes, term plan covers an insured even if he/she travels abroad for business/leisure purpose. However, if any such trip is scheduled at the time of buying the policy then the same should be mentioned in the proposal form.
What is sum assured?
Sum assured is usually referred to as the amount of insurance in a policy. It is the amount that would be paid to the nominee in case of death of the policyholder. Sum assured plays a major role in deciding premium rates of a policy.
Few policies also pay additional cover along with sum assured. This increases total life cover for the same sum assured.
Can I increase or decrease value of sum assured in future?
Once a term plan has been bought, you cannot.
Slightly unrelated, there are a few plans which have increased income facility in their structure. It means, these plans offer the benefit of monthly income increase every year. For example, HDFC Click2Protect Plus Increasing income, Max Life Increasing Monthly Income Plan, etc.
What is a premium paying term?
It is a term during which a policyholder pays premium to the insurance company.
What is death benefit?
The amount received by nominees at the time of death of a policyholder is called death benefit.
Who is a proposed insured?
A proposed insured is a person whose interests are safeguarded by insurance company. For instance, if you are an individual whose life is going to be covered under the insurance policy then you will be called proposed insured.
Is a pregnant lady covered in life insurance policy?
A pregnant lady is not covered if claims fall under exclusions of pregnancy clause imposed by the insurer at the time of issuing the policy. Also it will not be covered if non-disclosures are found with regard to pregnancy related questions (history of miscarriage, abortion, ectopic pregnancy) at the time of proposal.
If a pregnant lady wishes to cover under life policy, insurer can ask her to apply for it 3 months after delivery. However, this clause is not applicable if a pregnant lady is already covered under a plan.
What if I become an NRI after purchasing term insurance plan?
Your term insurance plan coverage will remain active even if you become an NRI post policy issuance. It is good to keep the insurer informed about the change in status though.
Are there any benefits of buying insurance at an early age?
Yes, buying insurance at an early stage would entitle you to a lower premium on the policy. The earlier you buy an insurance policy; the lower will be your premium amount. Also, chances of getting a policy are higher because of your good health.
How does a life insurance company evaluate my risks?
The life insurance company’s decision to insure your life or not relies on the information you provide in the application form. The evaluation of your risk is determined by several factors such as your age, habits, occupation, and medical history. If you have any pre-existing medical condition then the insurer will raise the premium of the policy. The increase in premium is subject to the actual medical status of the policyholder and risk posed to his life.
Do term plans cover death due to natural disaster?
Yes, term plans cover death due to natural disaster, like flood, earthquake, storm, etc.
Does insurance company cover death due to terrorist attack?
Yes, death due to terrorist attack/war/natural calamities is covered in insurance policy (unless specifically excluded by insurance company) and claim is settled if documentation is in order.
What are the exclusions of term insurance plans?
Term plans does not pays death claims if death occurs due to suicide within first year of policy issuance or within first year after reviving a lapsed policy.
Who is a preferred non-smoker and how is an individual declared as preferred non-smoker?
Non-smoker refers to a person who does not consume tobacco in any form. Preferred non-smoker is the one who does not have any pre-existing medical conditions at the time of signing the policy. Below are the situational requirements to fall under this category:
No use of tobacco or nicotine-based products in last 12 months
Cholesterol level not exceeding 280, with or without treatment
Blood pressure not exceeding 152/92, with or without treatment
No cardiovascular or cancer death of more than one parent before age 60
These customers generally fall under non-medical category – depending on their age. Preferred rates are applicable for this category if there is any differentiation by the insurer.
What's the big deal behind taking a life insurance policy?
