LIC Term Plans with Return of Premium

Looking at the popularity of the term insurance policies and the termination of the policy after the policy tenure, many insurance companies, including the Life Insurance Corporation of India (LIC) have come up with an advanced version, that is, Term Return of Premium Insurance plan (TROP).

Let’s discuss LIC Term Insurance with Return of Premium (TROP), plans in detail:

What is Return of Premium Term Plan?

Essentially, a LIC Term insurance with return of premium plan is similar to a regular term insurance plan. This plan works as a life cover and offers a death payout/benefit to the policy’s nominees/beneficiaries. The main component that sets it apart is the maturity payout offered under a TROP. Insurance buyers who want a term plan that offers survival benefits along with the death benefit can opt for a LIC Term Plan with Return of Premium.

Policyholders can receive benefits from a TROP by paying an additional amount of premium. One can select the requisite sum assured (SA) and policy term and pay the premium amount accordingly. The insurer will return the paid premium to the life assured when the policy matures.

Term Return of Premium Insurance Plan, apart from survival benefits, also comes with additional benefits in rider’s form.

How Does LIC Term Insurance with Return of Premium Work?

It is important to understand the objectives of insurance before buying any kind of policy. Understanding the process of LIC Term insurance with return of premium will help you have a better knowledge of investment. Let us look at an example:

Mr. X purchased a policy of Rs.20 lakh coverage for a tenure of 10 years. He is in good health and a non-smoker, so his premium paying amount comes out to be Rs.2,000. If he dies tomorrow, his nominee will receive Rs.20 lakh as the sum assured on his term insurance. However, if Mr. X survives the complete 10 years of the policy term, then his entire premium amount paid, that is, Rs.2,000 x 10 years = Rs.20,000 will be returned to him.

In this scenario, he is left in a no-profit no-loss situation if he survives the policy term. However, in case of his unfortunate demise, his nominee will be eligible for 20 lakhs, making this TROP investment a success.

Who Can Buy a LIC Term Insurance with Return of Premium (TROP) Insurance?

Generally, the minimum entry age to buy a term return of premium insurance plan is 21 years whereas the maximum can turn out to be 55 years. The premium payment amount depends on a lot of other factors as well apart from age such as income, lifestyle, medical condition, etc.

Mainly, individuals who fall under the following category can go for a term return of premium insurance plan:

1. Unmarried

   An unmarried person does not have a spouse but can have dependent parents to look upon. In case of the demise of the policyholder, it becomes a nightmare for the dependents to move forward in life especially on a monetary level. TROP insurance plan gives you and your dependents a safe and secure future.

2. Married without an offspring

   A married person without any offspring also requires future planning. In case the spouse is dependent on the policyholder solely, it is extremely necessary to secure his/her future so that he/she can plan his/her next level in life.

3. Married with an offspring

   Being a parent is altogether a different world. From managing your child to managing his/her future, all big responsibilities fall on you at the same time. To avoid such pressure, the term return of a premium insurance plan is one of the best ways to support your future planning.

Features of LIC Term Insurance Return of Premium (TROP) Plan

Here are some important features of the Term Return of Premium (TROP) plan:

• Affordability: LIC Term Insurance with Return of premium may be more expensive than a regular term insurance plan. However, the premium amounts paid for TROP are returned as maturity payout and are exempted from taxation.

• Multiple premium payment choices: The policyholder has the option to select the suitable sum assured amount under LIC  term plan with return of premium. Moreover, you can also choose the following best-suited premium payment option:

  • One–time payment

  • Regular pay

  • Pay till 60

  • Limited Pay

• Surrender value: After buying the term insurance with return of premium, if you discontinue payments of premium or surrender the plan, you will get a surrender value. This is subjected to certain conditions depending on the option of premium payment:

• Rider options are available: TROP also offers additional benefits such as disability benefit, accidental death benefit, waiver of premium, and protection against critical illnesses.

LIC Term Return of Premium (TROP) Plan Benefits

1. ROP Benefit

   Return of the premium is a great benefit that is not offered under a Regular term insurance plan. Survival benefit or maturity benefit has become a common term which an individual looks for while buying any policy these days. The term return of premium helps an individual to stay assured of a no-profit no-loss situation in case of survival.

2. Death Benefit

   The primary focus while purchasing a term plan is life coverage. Under term return of premium (TROP) insurance plan, the focus is on expense coverage by the family of the policyholder during the time of crisis.

3. Tax Benefit

   Tax benefits are available under the Term return of premium insurance plan as per the prevailing tax laws under Section 80C and 10(10D) of the Income Tax Act, 1961.