Regular Term Plan or Return of Premium? What to Choose?

Let us look at an example for a better understanding.

Rahul lived a happy life with his mother and father. They were living a healthy and financially stable life. Both his parents had a term insurance policy in their names and the nominee was Rahul. His parents were satisfied that even if one of them is not there tomorrow, Rahul will be secured financially.

However, since both of them had a healthy lifestyle, they planned to discontinue their Regular Term Plan and get their refunds instead. To their surprise, they got to know that there is no refund of the premiums paid to date under the Regular Term Insurance Policy.

After a lot of confusion, they came to know about the Term Return of Premium Insurance Policy (TROP), which is an advanced version of the Regular Term Insurance Policy.

The major difference between the Regular term plan and the Return of Premium term plan is that the Regular term plan, on one hand, pays a lump sum amount to the nominee in case of the demise of the policyholder during the policy term. On the other hand, the Term Return of Premium Insurance plan (TROP) offers survival benefits after the maturity of the term insurance policy.

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

Note: Know more about what is term insurance first before reading this article.

Term Return of Premium (TROP) Plan Benefits

The following are the term insurance benefits offered under TROP:

1. Survival Benefit

   If one opts for a Term Return of Premium Insurance plan instead of a Regular Term Insurance plan, then he/she is provided with the survival benefit. Under survival benefit, if the policyholder surpasses the policy tenure, then he/she is eligible for the return of premiums paid to date. Premium payment return can surely be beneficial during retirement.

2. Death Benefit

   Just like the Regular term insurance plan, the Term Return of Premium plan (TROP) also comes with a death benefit. This means that if the policyholder dies unfortunately during the policy tenure, then the nominee of the policy will receive a sum assured amount.

3. Tax Benefit

   Under the Term Return of Premium Insurance plan, tax is exempted on the premiums paid under Section 80C of the Income Tax Act, 1961.

4. Premium Return Benefit

   Under a regular term insurance plan, the policy terminates as soon as the policyholder stops the premium amount paid. However, in the case of a return of premium term plan, policyholders can discontinue their term insurance policy at any point they want. At the time of discontinuation, premiums paid will be returned after making necessary deductions.

5. Protection Benefit

   There is no protection coverage if the policy lapses under the regular term plan. However, in the case of the Term return of premium insurance plan (TROP), the policy continues even if the policyholder is unable to pay their premiums. However, some benefits like death benefits or maturity benefits may be decreased if the policyholder misses paying the premium of the policy.

Difference Between Regular Term Plan and Term Return of Premium Plan

“Tax benefit is subject to changes in tax laws. Standard T&C apply.”

Disclaimer: Policybazaar does not endorse, rate, or recommend any particular insurer or insurance product offered by an insurer.

Note: You can easily calculate the term plan premium by using the term insurance calculator online tool.

To Conclude!

A term plan with a return of premium comes with much more benefits compared to the regular term insurance plan. However, along with extra benefits comes extra expense and extra risk.

It is completely up to the individual, whether to go for a regular term plan or term plan with a return of premium, depending upon his/her needs and requirements.

Note: Check out the best term insurance plan in India and choose one that suits your requirements.