When it comes to securing your family’s future, life insurance is an essential tool. Among the different types of life insurance, Term Insurance is often regarded as the most affordable and straightforward option. However, for those seeking more value from their premium payments, there is an attractive variant known as Term Insurance with Return of Premium (TROP).
In this blog, we will explore what TROP is, how it works, its benefits, and who should consider it.
What is Term Insurance with Return of Premium (TROP)?
Term Insurance with Return of Premium (TROP) is a type of life insurance that combines the cost-effectiveness of traditional term insurance with the added benefit of returning the premiums paid if the policyholder survives the policy term. Unlike a standard term insurance policy, where you lose the premiums paid if you outlive the policy, TROP ensures that you get a refund of the premiums after the policy term ends, assuming there are no claims.
How Does TROP Work?
In a TROP policy, you pay a premium for the chosen term (usually between 10 to 40 years). If the policyholder passes away during the term, the beneficiary receives the death benefit, just like a regular term policy.
However, if the policyholder survives the entire policy term, the insurance company will refund the premiums paid during the term, either in lump sum or through installments (depending on the terms of the policy). Essentially, you get your premiums back, making it a “win-win” situation for policyholders.
Key Features of Term Insurance with Return of Premium
- Life Coverage: Like traditional term insurance, TROP provides a death benefit to the nominee in case of the policyholder’s untimely demise.
- Premium Refund: If the policyholder survives the entire term, the premiums paid over the years are returned.
- Affordable Premiums: TROP plans are generally more affordable than permanent life insurance plans like endowment or whole life policies, while still offering additional benefits.
- Tax Benefits: Premiums paid for TROP plans qualify for deductions under Section 80C of the Income Tax Act, and the death benefits are tax-free under Section 10(10D).
- Flexibility in Payout: The sum assured under TROP can be paid in lump sum or in monthly/annual installments depending on the policy chosen.
Who Should Consider Term Insurance with Return of Premium?
While TROP offers a host of benefits, it may not be suitable for everyone. Here’s a look at who should consider purchasing a TROP policy:
- Young Families with Financial Dependents: If you are the sole breadwinner or have young children, TROP ensures your family’s financial security even if something were to happen to you, with the added benefit of a premium refund if you survive the term.
- People Who Prefer ‘Savings with Protection’: If you’re looking for life insurance coverage that also acts as a forced savings plan, TROP may be appealing since it returns the premiums at the end of the term, essentially offering a savings component alongside protection.
- Individuals Who Want to Maximize Value: If you want to get back the money you invested in the insurance policy, TROP is a good option. However, it is important to note that this feature comes with slightly higher premiums compared to regular term plans.
- Those Who Are Averse to ‘Losing’ Premiums: Many people hesitate to buy term insurance as they feel that the premiums are wasted if they outlive the policy. TROP eliminates this concern, providing a sense of financial security even if the policyholder survives.
Benefits of TROP
- Financial Security with Refund: You are protected for the entire term, and if you survive the term, you get your premiums back. It’s an ideal blend of security and value.
- Cost-Effective: TROP offers life insurance protection at a lower premium rate compared to permanent insurance plans like whole life or endowment policies.
- Peace of Mind: With the knowledge that your premiums will be refunded if you outlive the policy, you can have peace of mind knowing that you won’t lose money.
- Tax Saving: Premiums paid are eligible for tax benefits under Section 80C of the Income Tax Act, and death benefits are tax-free under Section 10(10D).
Drawbacks of TROP
- Higher Premiums: While TROP is a good option for those seeking a refund of premiums, the premiums are generally higher compared to a standard term plan. This can be a disadvantage if you’re on a tight budget.
- Not Suitable for Short-Term Needs: If your insurance needs are short-term, a traditional term insurance policy would be a better option. TROP is designed for long-term coverage, and you may not benefit as much if you don’t survive the term.
- Investment Element: While TROP refunds your premiums, this is not a traditional investment product. You might not get back the full value of the premiums in terms of returns if you outlive the term. For pure investment returns, other products like mutual funds or unit-linked insurance plans (ULIPs) may be more lucrative.
Who Should Avoid TROP?
- Budget-Conscious Individuals: If you are primarily looking for pure life coverage and do not have any concerns about the refund of premiums, a regular term insurance plan could be a more affordable choice.
- Those with High-Return Investment Needs: If you are looking for investment-based growth, TROP might not provide the best returns. In this case, you should consider products like ULIPs or mutual funds, which offer potential market-linked returns.
Best Term Insurance with Return of Premium Plans
While choosing a Term Insurance with Return of Premium (TROP) policy, it’s essential to understand which plans are among the best in terms of coverage, features, and affordability. Below is a list of some of the best TROP plans in India that offer excellent benefits, flexible features, and competitive pricing.
1. HDFC Life Click 2 Protect Plus
HDFC Life Click 2 Protect Plus is one of the most popular term insurance plans with a Return of Premium option. The plan provides comprehensive protection with multiple payout options, including a lump sum or monthly income. Additionally, it offers a Return of Premium (ROP) feature, where all premiums are refunded at the end of the policy term, provided the policyholder survives the term.
Key Features:
- Flexible payout options (lump sum, monthly income, or a combination).
- Coverage for critical illness and accidental death.
- Tax benefits under Section 80C and Section 10(10D).
- Return of Premium if the policyholder survives the term.
- Option to choose premium payment term (regular or limited).
2. Max Life Smart Term Plan
The Max Life Smart Term Plan is a highly customizable term insurance policy offering the option to include a Return of Premium (ROP) feature. It ensures that if the policyholder survives the policy term, all premiums paid are refunded.
Key Features:
- Flexible policy term (10 to 40 years).
- Multiple riders available (Accidental Death, Critical Illness).
- Lump sum or monthly income payout options.
- Provides Return of Premium if the policyholder survives the term.
- Tax benefits on premiums and death benefits.
3. Tata AIA Life Term Insurance Plan (Return of Premium)
The Tata AIA Life Term Insurance Plan is a reliable policy offering a Return of Premium (ROP) option, allowing you to get your premiums back if you outlive the policy term. This policy ensures financial security for your family, along with the advantage of receiving a refund at the end of the term.
Key Features:
- Customizable coverage and riders (Critical Illness, Accidental Death).
- Premium refund at the end of the policy term.
- Flexible premium payment options.
- Tax deductions under Section 80C.
- Lump sum or monthly payout options for death benefits.
4. SBI Life eShield Next (Return of Premium)
SBI Life eShield Next is an online term insurance policy that also offers a Return of Premium (ROP) option. With this plan, the premiums paid during the policy term are refunded if the policyholder survives the term. SBI Life eShield Next provides comprehensive coverage along with additional riders for greater flexibility.
Key Features:
- Premium refund after the policy term.
- Flexibility in choosing policy term and premium paying frequency.
- Critical illness cover and accidental death benefit available as riders.
- Tax benefits under Section 80C and Section 10(10D).
- Online application makes it a convenient and cost-effective option.
5. ICICI Prudential iProtect Smart (Return of Premium)
The ICICI Prudential iProtect Smart plan is an excellent choice for those looking for a Return of Premium policy that also provides comprehensive life coverage. In addition to the base coverage, the plan offers options like critical illness coverage and an accidental death benefit rider.
Key Features:
- Affordable premiums with a Return of Premium feature.
- Flexible payout options (lump sum, monthly income, or a combination).
- Accidental death and critical illness coverage available as riders.
- Comprehensive coverage for life, health, and disability.
- Tax benefits available under Section 80C.
6. Reliance Nippon Life Term Plan Plus
Reliance Nippon Life Term Plan Plus offers a Return of Premium feature that ensures the policyholder gets all premiums refunded at the end of the policy term if they outlive it. This plan provides life insurance coverage at affordable premiums along with the option of adding riders like critical illness and accidental death benefits.
Key Features:
- Return of Premium feature ensures that premiums are refunded at the end of the term.
- Coverage for critical illness, accidental death, and total and permanent disability.
- Flexible premium payment options (annual, semi-annual, or monthly).
- Tax benefits under Section 80C and Section 10(10D).
- Available online for a hassle-free buying experience.
7. Bajaj Allianz Life Smart Protect Goal
The Bajaj Allianz Life Smart Protect Goal plan is an excellent choice for people looking for an affordable term plan with a Return of Premium option. This plan offers multiple riders to enhance coverage and ensures the policyholder gets a refund of the premiums paid at the end of the policy term.
Key Features:
- Flexible term and premium payment options.
- Return of Premium feature after the policy term.
- Offers riders like Critical Illness and Accidental Death Benefit.
- Tax-saving benefits under Section 80C and Section 10(10D).
- Online purchase facility available for quick and easy buying.
8. HDFC Life Click 2 Protect Plus (Return of Premium)
The HDFC Life Click 2 Protect Plus plan offers a Return of Premium (ROP) feature that ensures the return of premiums if you outlive the policy term. It also provides customizable coverage options with riders for accidental death and critical illness.
Key Features:
- Return of Premium available.
- Multiple payout options (lump sum, monthly income, or combination).
- Option to add riders like Accidental Death and Critical Illness.
- Tax benefits under Section 80C and Section 10(10D).
- Available online for easy and convenient purchase.
9. Aditya Birla Sun Life Life Shield Plan
Aditya Birla Sun Life Life Shield Plan is a flexible term insurance policy offering a Return of Premium feature. This plan provides comprehensive life coverage along with the return of premiums paid if the policyholder survives the policy term.
Key Features:
- Return of Premium at the end of the policy term.
- Coverage for accidental death and critical illness.
- Available online for convenience and cost-saving.
- Tax benefits under Section 80C and Section 10(10D).
- Various premium payment options to suit your needs.
10. Kotak Life Term Plan (Return of Premium)
Kotak Life Term Plan with Return of Premium is another excellent choice for those seeking life coverage with the added benefit of getting premiums back at the end of the term. It offers flexibility in choosing the policy term, premium payment frequency, and riders for enhanced protection.
Key Features:
- Return of Premium available.
- Flexible coverage options with critical illness and accidental death riders.
- Tax-saving benefits under Section 80C and Section 10(10D).
- Easy online application for a hassle-free experience.
Conclusion
Term Insurance with Return of Premium (TROP) is an attractive option for individuals seeking life coverage along with the refund of premiums if they survive the policy term. It provides the protection of traditional term insurance along with the added advantage of getting your premiums back, ensuring that you don’t feel like your money has gone to waste.
However, it’s important to weigh the cost of higher premiums against the potential for receiving a refund at the end of the term. Carefully consider your financial goals, the insurance coverage you need, and your budget before opting for TROP.
If you’re still unsure, it might be beneficial to compare multiple term insurance plans and speak to an insurance advisor to help you make the best decision for you and your family’s future.
Understanding Term Insurance with Return of Premium (TROP)
Term insurance with Return of Premium (TROP) is an innovative variant of term insurance that not only provides financial protection in case of the policyholder’s death but also refunds the premiums paid if the policyholder survives the policy term. This feature makes it an attractive option for those who want the benefits of life coverage with the added advantage of receiving their premiums back if they outlive the policy term.
FAQs
1. What is Term Insurance with Return of Premium (TROP)?
Term Insurance with Return of Premium (TROP) is a type of life insurance policy that provides life coverage for a specified term and refunds the premiums paid if the policyholder survives the policy term.
2. How does Term Insurance with Return of Premium work?
In a TROP plan, you pay regular premiums during the policy term. If you survive the term, the insurer refunds the premiums paid. If the policyholder passes away during the term, the nominee receives the death benefit.
3. What is the difference between regular term insurance and TROP?
In regular term insurance, if the policyholder survives the policy term, no benefits are provided. In contrast, TROP plans refund the premiums paid if the policyholder survives the policy term.
4. Who should consider buying Term Insurance with Return of Premium?
TROP is ideal for individuals who want life coverage but also want their premiums refunded if they outlive the policy. It’s suitable for those who are cautious about paying premiums without a return if they survive the term.
5. How does the premium of TROP compare to regular term insurance?
TROP premiums are typically higher than regular term insurance because the insurer refunds the premiums at the end of the policy term. The added benefit of the return of premiums makes the policy more expensive.
6. What happens if I survive the term of the policy?
If you survive the term, you will receive a refund of the premiums paid, and the coverage ends. Some policies may also offer a Return of Premium (ROP) feature that returns the full amount of premiums paid during the policy term.
7. Can I cancel my TROP policy before the policy term ends?
You can cancel your policy, but you may not receive any refund of the premiums if the policy is surrendered before the end of the policy term.
8. Are there any tax benefits associated with TROP?
Yes, premiums paid towards TROP policies are eligible for tax deductions under Section 80C of the Income Tax Act, and the death benefit is tax-free under Section 10(10D).
9. Can I buy TROP online?
Yes, many insurers offer Term Insurance with Return of Premium plans online, making it convenient for customers to apply and purchase policies without the involvement of an agent.
10. What are the payout options available under TROP?
TROP policies typically offer two primary payout options:
- Lump sum payout: A one-time lump sum is paid to the nominee in case of death during the policy term.
- Monthly income payout: A fixed monthly amount is paid to the nominee to provide regular income.
11. Are riders available with TROP plans?
Yes, many TROP plans allow you to add riders such as Accidental Death Benefit, Critical Illness, and Waiver of Premium to enhance the coverage.
12. What happens if I miss a premium payment under TROP?
If you miss a premium payment, most policies offer a grace period of 30 days. If you fail to pay within the grace period, the policy may lapse, and you may lose the benefits, including the Return of Premium feature.
13. Can I increase the coverage amount after purchasing TROP?
Typically, the coverage amount cannot be increased once the policy is issued. However, you may be able to add riders or purchase a new policy with higher coverage.
14. Can I take a loan against a TROP policy?
Yes, you can take a loan against your TROP policy, but the loan amount cannot exceed the surrender value of the policy. If you do not repay the loan, the insurer may deduct the amount from the death benefit.
15. Is TROP available for senior citizens?
TROP plans are usually available for individuals between the ages of 18 and 65. However, the availability and premium cost may vary depending on the insurer’s guidelines and the applicant’s age.
16. What is the maximum sum assured under TROP?
The maximum sum assured varies by insurer, but TROP policies generally offer coverage amounts ranging from ₹10 lakh to several crores, depending on your age, health, and underwriting criteria.
17. Are pre-existing medical conditions covered under TROP?
Pre-existing conditions may either be excluded or come with higher premiums or waiting periods, depending on the insurer’s underwriting policies. It’s essential to disclose any pre-existing conditions during the application process.
18. Can I purchase multiple TROP policies?
Yes, you can buy multiple TROP policies from different insurers, but you must disclose the details of your existing policies during the application process.
19. Does the policy term of TROP impact the premium amount?
Yes, the longer the policy term, the higher the premium. Longer policy terms usually require higher premiums to provide the Return of Premium benefit.
20. What are the top insurance companies offering TROP plans?
Some of the top insurers offering Term Insurance with Return of Premium (TROP) include:
- HDFC Life
- Max Life Insurance
- SBI Life Insurance
- ICICI Prudential Life Insurance
- Bajaj Allianz Life Insurance
- Reliance Nippon Life Insurance
