Top Benefits of Term Insurance with Return of Premium
A term insurance policy has significant importance in your financial plan, especially when there are a lot of uncertainties surrounding us. However, with multiple varieties of term insurance plans already in the market, selecting the right one for you is undoubtedly a tough decision. But if you are looking for a policy that assures financial security for your family in case of any unfortunate event for yourself and returns the premiums paid on survival of the policy term, then a term plan with a return of premium is the right fit for you.
What is the Return of Premium (TROP) plan?
A term life insurance with a return of premium provides the death benefit on the policyholder’s demise, similar to the original term plan. Still, at the time of maturity, and in the case of the policyholder surviving the policy term, the insurer returns the paid premiums.
Top 5 Benefits of term plan with return of premium
The term insurance plan with a return of premium is a product that combines insurance coverage and savings. How does it balance between both and what are the other benefits of this plan, are explained in detail below:
- Return of Premiums
- Bonus on Premiums
- Affordable Premium
- Ability to add riders
- Flexible-Premium Options
1. Return of Premiums
The first and foremost benefit of a term plan with the return of premium is the money-back feature. You won’t get back the premiums paid in a standard term insurance policy as it is designed to provide the death benefit only. But in TROP, if you survive the policy term, you shall get back all the premiums paid over the years, which you may use for other purposes or invest in other products.
2. Bonus on Premiums
Most insurers promise bonuses on the premiums being repaid to the policyholder at the time of maturity. For example, let us assume that you have purchased a term policy with a return of premium at 4 percent for a sum assured of Rs. 1 crore for an annual premium of Rs. 30,000 and a tenure of 20 years. In case you encounter death during the policy term, the sum of Rs. 1 crore is paid to your nominee. But if you survive the entire policy term, you shall receive Rs.6 lakhs, which is the total premium paid for the policy over the past 20 years. With the bonus at the rate of 4 percent, you are eligible to receive an additional amount.
3. Affordable Premium
It is generally said that while opting for insurance with a return of premium option, you may need to shell out a considerable sum as a premium. It is not entirely true. Suppose you perform a term plan with a return of premium compared with the other common types of life insurance plans such as endowment, money back, and Unit Linked Insurance Plans (ULIPs). In that case, you can easily say that the premiums of TROP plans are lower. Although it is still costlier than the standard term insurance plans, it is still within reach of affordability among the ordinary person.
4. Ability to add riders
To improve the coverage of your existing plan, TROP provides you with the facility of adding riders, which are nothing but additional covers designated for specific requirements. This is one other return of premium term insurance benefits, which a policyholder can choose as per their choice from the following available covers: personal accident rider, a physical disability rider, critical illness rider, terminal illness rider, etc. You may include these at the time of purchasing the policy or can also be added at a later stage.
5. Flexible-Premium Options
A variety of premium payment options are available in TROPs wherein the policyholder can choose between monthly, quarterly, half-yearly, and yearly modes to pay premiums. This is also one of the essential benefits of a term plan with a return of premium and helps those who are new to insurance and prefer to utilize the insurance coverage while still choosing to pay the premium in their method.
Difference between Regular Term Insurance vs Return of Premium Term Plan
In your search for the best term insurance plan with return of premium, it is necessary to understand the prime difference between a standard term insurance policy and TROP. It will surely help you in making an informed decision:
| Regular Term Insurance | Return of Premium Term Plan | |
| Coverage value | Avail a high sum assured through these plans, towards as they provide the death benefit to family protecting their financial commitment | A high sum assured equivalent to a regular term plan can be bought as these policies are not different from term plans. |
| Term of policy | One can choose the tenure of policy between 10 to 30 years. | The tenure of policy can be chosen between 10 to 30 years. |
| Death benefit | The insurer pays a death benefit, in case of death of the policyholder during the policy tenure, to the nominee. | The sum assured is paid to the nominee of the policyholder on the demise during the policy term. |
| Maturity/ Survival benefit | There is no amount paid to the policyholder at the time of maturity. | The total of premiums paid by the policyholder during the policy tenure is returned to the policyholder along with a bonus if any. |
| Premium cost | Premiums of term plans are the lowest of all types of insurance policies. | Premiums are higher than regular term plans but lower than other types of insurance plans. |
| Income tax benefits | Tax deduction available for premium paid, under Section 80C of the Income-tax act.
Tax deduction available for premium towards critical illness riders, under Section 80D. Tax exemption available for death benefit received under Section 10(10D). |
Tax deduction available for premium paid, under Section 80C of the Income-tax act.
Tax deduction available for premium towards critical illness riders, under Section 80D. Tax exemption available for death benefit received under Section 10(10D). |
| Best suited for | Those who want a high life insurance coverage at affordable cost, without any expectation of return or bonus on maturity. | Those who expect to get a return of premiums at the time of maturity and are also comfortable in spending a little extra on premiums. |
The bottom line is the choice of term insurance depends on your requirements and affordability. If you are looking for a term plan that offers maturity benefit if you outlive the policy term, then you should opt for term insurance with return of premium. To know more about the best term plans with return of premium, you can visit iiflinsurance.com.
