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

Term insurance policy is one of the purest forms of policies available in the insurance market today. Term insurance, as the name defines, is for a particular tenure. That is, a regular term insurance policy offers benefits to the family of the policyholder in case of his/her untimely demise, only during the policy tenure. This means that in a regular term plan, if the policyholder survives the policy tenure, then he/she is not eligible for any benefits offered under the policy. At this point, Term Return of Premium (TROP) comes to the rescue.

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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.

Term Return of Premium (TROP) Plan Benefits

The following are the 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

Regular Term Plan

Term Plan with Return of Premium

Pure Term Insurance Plan

Term Plan with Return of Premium (TROP)

A regular term insurance plan is the simplest form of life insurance product.

TROP is one of the variants of a term insurance plan

Insurance coverage is offered in the form of a death benefit during the policy tenure only.

TROP along with death benefit comes with other benefits such as survival benefit, premium return benefit, etc.

A regular term insurance plan is simple and affordable as compared to any other plan in the insurance market.

TROP, on the other hand, is more expensive in terms of premium payment over the regular term insurance plan.

The premium rate of a regular term insurance plan is very affordable.

The premium charged by Term Return of Premium (TROP) is considerably higher.

Offers the benefit of tax exemption under section 80C of the Income Tax Act.

Offers the benefit of tax exemption under section 80C of the Income Tax Act.

A regular term plan is best suited for individuals who want to support their family financially even after their demise.

Term insurance return of premium plan is best suited for individuals who, along with family protection want good returns along with extra benefits.

“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.

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.

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