How Is Pure Term Insurance Plan Different From Term Plan With Return of Premium

What is A Pure Term Insurance Plan?

A pure term insurance plan offers lump-sum benefits and regular income to the nominee in case of the policyholder’s demise during the tenure of the policy. However, there are no maturity benefits if the policyholder outlives the policy period. 

The benefits offered by a pure term insurance policy are:

Benefits

• Offers the sum assured when the policyholder passes away. 
• Low monthly/quarterly and yearly premiums. 
• High death coverage.

Disclaimer: These are the generic benefits offered by most term insurance providers. You may get additional benefits subject to the insurer's policies.

What is a Term Plan with Return of Premium (TROP)?

On the other hand, a term plan with maturity or survival benefits is known as a term plan with a return of premium or TROP. So in this type of term plan apart from basic death coverage, you get a return of premium if you survive the policy tenure.

Even though with TROP you have to pay a higher premium than the basic term plan, but you get the survival benefit. So, with this, all you have to do is simply select the assured amount and the policy period you wish to purchase and then pay the premiums. The insurer will refund the premiums to you at the time of policy maturity.

Mentioned below are the top benefits of TROP.

Benefits

1. Maturity Refund

   A TROP will refund your premium at maturity if you live beyond the policy tenure. You don't lose any premiums you have paid throughout the policy tenure. You get everything back.

2. Assured Premium Returns

   A TROP plan ensures that policyholders are not worried about losing their money. This plan gives guaranteed returns on the premium paid, but not any additional premiums for coverage enhancements with the rider.

3. The Paid-up Choice

   TROP offers a 'paid-up option' for people who don't have a stable source of income. This option assists policyholders in instances where they are unable to pay a premium.

4. Flexible Premiums

   You can pay the premiums monthly/quarterly, or yearly. This policy allows you an option to choose the payment option that suits your financial interests. For example, if you have just started your job, you can opt for a single payment option as you may have other responsibilities to take care of.

5. Tax Advantages

   You can avail of tax benefits with TROP in line with the existing tax rules. The premium paid and the amount you draw are exempt from tax under sections 80C and 10(10D) of the Income Tax Act 1961.

Term Insurance Vs. Return of Premium

Disclaimer: This is a generic term plan with return of premium comparison and some aspects may vary from insurer to insurer. 

Wrapping Up

When it comes to comparing term insurance vs the return of premium, your priority should be the death benefit. At the end of the day, life is more precious than money and should be protected at all costs. You can select a basic term plan that only provides death benefits. However, if you see term insurance as an investment and are ready to pay higher premiums, consider going with a term plan with a return on premium.

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