Term plan with return of premium: All you need to know

Term insurance is a well-known insurance product among policy buyers.  It helps cover future eventualities and secure your family. A term plan with a return of premium, also known as TROP, is a variant of term plan. It differs from a standard term plan. The basic difference is that standard term plans offer only death benefits for the insurer. There is no other benefit. On the other hand, TROP offers the benefit of the return of premium as a survival benefit to the insured if he/she survives the term of the policy.

Features of TROP

A term plan with a return of premium is different from a regular term plan.

Here’s a look at the main features of this type of insurance plan:

1) Sum assured

Term insurance return of premium (TROP) offers a lower sum assured amount as compared to the pure term insurance policy.  As the policyholder, one can choose the suitable sum assured under this plan.

2) Premium

Term plans with return of premium (TROP) are slightly more expensive than a regular term plan.

3) Premium payment options

The entire premium for TROP is payable as a one-time lump sum amount or in regular intervals throughout the policy tenure or till the age of 60 years. You can pay the premiums for a fixed number of instalments under the limited pay option.

4) Surrender value

After purchasing the term plan with return of premium, if you discontinue premium payments or surrender the plan, you will receive a surrender value. The value varies depending on the payment option.

5) Riders

Riders are the additional benefits that you can add to your basic plan to make it more comprehensive. You can buy a rider by paying extra cost. Insurance companies offer various riders in addition to the basic cover. These riders include personal accident or disability rider, critical illness rider, hospitalisation cash benefits rider.

Benefits of TROP

Let’s take a look at the benefits of a term plan with return of premium:

1) Survival or maturity benefits

The survival or maturity benefits is offered by a term plan with a return of premium. Under a simple TROP plan, the insured gets back all the money they had invested as the premium for the plan excluding any taxes.

2) Death benefit

The term plan with return of premium offers death benefit as the total sum assured amount to the nominee in case the insured person passes away due to any eventuality.

3) Tax benefits

Purchasing a term plan with return of premium makes a person eligible for tax benefits. Under section 80C and 10(10D), the premium paid towards the term plan and the benefit amount are tax-free.

Who can buy?

Term plan with return of premium (TROP) can be purchased by all individuals irrespective of whether they are single, married or married and have kids. The minimum entry age is 21 years whereas the maximum limit is 55 years.