Term Insurance With Return of Premium (TROP) Plan
The key features and benefits of a return to premium plan, the premium cost, survival benefit and most importantly, who the plan is best suited for. Know more about the death benefit, maturity benefit, tax benefits and the privileges of such plans.
What is Term Insurance?
Term insurance is the purest form of life insurance available in the markets. With a term insurance plan you get a sum assured to cover your life and the premiums are much much lesser than what you would end up paying for a ULIP or an endowment plan. With a term insurance plan, you can get your life assured for about Rs. 1 crore for a premium of just Rs. 7,000 (actual sum assured and premiums may differ from one insurer to another).
A term insurance plan is also a good way to backup any other investments you may have made, in the sense that if those investments don’t pay out due to reasons like turbulent markets (especially in the case of ULIPs), a term insurance will pay the death benefits. It also affords the opportunity to leave behind a sizable amount of money for your family without having to pay through your nose for it thus making it very affordable.
Term Insurance With Return of Premium
How a term insurance plan works is that you pay a premium for the amount you chose as the sum assured. The premium may be paid throughout the duration of the policy, which can range from 5 years to 25 years depending on the insurance provider and the plan being offered. The time where the difference between a term insurance policy and a term insurance with return of premium (TROP) becomes apparent is when the policy matures. At the time of maturity the insurer will return the entire premium paid by the policyholder towards the policy.
Survival Benefits
Traditionally, term insurance plans dont offer any maturity benefits but with the TROP plans the survival benefit offered is the return of the premiums paid. Let’s look at an example. Let’s suppose that you are looking for a cover of Rs. 1 crore and find a TROP plan for which the premium is Rs. 7,100 per year. You take the plan for 10 years and the premium payment terms are regular pay. This means that over a period of 10 years you will spend Rs. 71,000 on the life insurance plan. How the TROP works is when the 10 years are over and you outlive the policy, the insurer will pay you a sum of Rs. 71,000 as the survival benefit.
Top Term Insurance Plans With Return of Premium
These are some of the term insurance plans that offer a return of premium on maturity.
- Max Life Premium Return Protection Plan
- ICICI Prudential LifeGuard
- Tata AIA Life Insurance iRaksha TROP
- MetLife Suraksha TROP
Key Features of Term Life Insurance Plans With Return of Premiums
These are some of the features that you can expect from a TROP. It should be remembered that while some of the features are dependent on the insurer's policies and can differ.
Policy term | The duration of a term insurance policy with return of premium can range from 5 years to 35 years. |
Entry Age | The entry ages for these plans will depend on the maturity age and the policy term that is selected. The minimum age can be 18 years and may change depending on the insurer and the plan. |
Plan type | These are pure protection plans. |
Age at maturity | The age at maturity can be up to 75 years of age. |
Policy revival | If a policy has lapsed due to non-payment of premiums it can be revived within 2 years from the last premium paid. |
Premiums | The premiums for these policies can be paid in the following ways:
|
Premium paying term | These policies tend to be regular pay polices wherein the premiums need to be paid for the duration of the policy term. Some insurers even offer the option of a one-time payment of premiums. |
Nomination | These policies do offer nomination facilities. |
Sum Assured | There is no limit on the sum assured with a term insurance, though it can be subject to insurance underwriter’s approval or company policy. |
Policy coverage | |
Free-look period | The free look period for term insurance policies is 15 days from the day that the policy documents are received on. |
Grace period | The grace period provided for the payment of the premium is 30 days from the due date. This period may be a bit shorter in case the premiums are being paid monthly. |
Benefits Offered by Term Life Insurance Plans with Survival Benefits
- Death benefits: In the unfortunate event of the death of the life insured, the nominee will be paid the entire sum assured as the death benefit.
- Tax benefits: The premiums paid for these policies can be submitted for tax benefits under section 80C of the IT Act.
- Maturity benefits/survival benefits: Being a return of premium plan, the maturity benefit will be a return of 100% of the premiums paid.
- Riders: These policies can be coupled with various riders offered by insurers like critical illness rider or accidental death riders.
- Paid up value: If the premiums for the policy are not paid and the policy lapses without being revived, instead of ceasing the cover the insurers will reduce the death benefits to suit the premiums paid and continue life cover till the policy term expires.
- With some insurers, if you choose to discontinue the policy, they will return the premiums paid minus a fee or a predefined amount.
How to Choose The Best Life Insurance Plan With Return of Premium:
Finding the right term insurance plan can be an easy task if you keep a few factors in mind. These are:
- The cover amount should be sufficient to ensure your family’s financial future if something happens to you.
- The premium that you have to pay should be affordable.
- The claims settlement ratio of the insurer must be good.
- In case you don't want to make a one-time payment, the plan should allow for annual, half-yearly, quarterly or monthly payments.
FAQs on Term Insurance Plan Return Premium
- What is importance of term insurance policies?
A typical term insurance policy will provide you with a total sum assured amount covering your entire life. Additionally, lower premiums involved in term plans are a great reason why people want to purchase them. In comparison with ULIP or an endowment plan, a term insurance policy is much more reliable as it essentially provides as a backbone for any another investment you may have made.
- Term Insurance Policies: How They Operate?
You begin by choosing a particular plan most suitable to your needs and the needs of your family members for which you go ahead and pay the entailed premiums. The policy's total duration can range from 5 years to 30 years depending on the insurer and the policy that you have chosen. When a term insurance policy matures, the insurer thereby returns the premium amount contributed by the policyholder. In case you want a premium return upon maturity of the policy, you can conduct adequate research before investing, however, the below-mentioned term insurance policies offer return of premiums: Max Life Protection Plan - Offers Return of Premium TATA AIA Life Insurance ICICI Prudential TROP Offered by MetLife Suraksha There are multiple factors that one must keep in his/her consideration before buying a term insurance policy. Some of these factors include the claim settlement ratio of the insurer, the amount of money you are paying as premiums, if the policy has an option to pay the premiums monthly, quarterly, or annually, and so on.
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