Term Plan with Return of Premium

What is Term Plan with Return of Premium?

How does Term Plan with Return of Premium work?

Features of Term Plan with Return of Premium

Benefits of a Term Plan With Return of Premium

Who Should Buy Term Plan with Return of Premium Policy?

How to Choose a Term Insurance Plan with Return of Premium?

Term Plan with Return of Premium vs Pure Term Plan

Term Plan is not a usual investment product and is not directed towards the goal of wealth creation. However, it is a wealth protector in case of unfortunate circumstances.

Let’s discuss the striking differences between the Pure Term Plan and Term Plan with the Return of Premium:

Point of Comparison Pure Term Plan Term Plan with Return of Premium
Insurance Claim Benefit A Pure Term Plan provides only death benefit as a part of coverage. TROP provides death benefit in case of death during the policy term. However, in case of survival, it pays out the sum of all premiums paid.
Premium The premium of a Pure Term Plan is quite affordable. Usually, 0.1% of the Sum Assured. The premium of a TROP is usually 2-3 times higher than the Pure Term Plan.
Sum Assured The Sum Insured for an X amount of premium in case of Term Insurance is usually 10X. The Sum Assured in case of TROP is usually much lower when compared to the Pure Term Plan.
Goal for Investment Best suited for people whose primary aim is to provide an elevated level of financial security to their family with a high sum insured. Best suited for people who are looking for an optimum financial protection and some return value on the investment.
Premium Refund No Premium Refund in this case All Premiums paid are refunded on policy maturity
Surrender Value Does not have any surrender value since there is no savings component Provides surrender value if the policy is ended early but after the minimum required period for surrender.

FAQs about Term Plan with Return of Premium

Do I get my money back if I cancel my Term Insurance with a Return of Premium?

No, in case of cancellation or lapse of the policy before the term is complete, you do not receive any premium back. Hence it is never advisable to cancel your policy mid-term.

Is the Return of Premium Under the Term Plan with Return of Premium Taxable?

No, since it is a refund and not an income, the return of the premium in a TROP is non-taxable. 

Are NRIs eligible for Purchasing Term Insurance in India?

Yes, any NRI who holds dual citizenship, and is a citizen of India, can purchase Term Insurance in India.

What are a few Cons of Term Plan with Return of Premium?

  • TROP has very limited options across insurance providers. So it's usually difficult to find a suitable insurance policy. 
  • If you are looking at the cash value of your investment, you should rethink. TROP are more expensive than the regular term plans. The extra money spent could be saved somewhere better. Also, if you look at the large tenure of these policies, you will  realise that the money that you receive as a refund is depreciated due to inflation. 

Is the Premium Amount Higher for TROP Compared to Traditional Term Insurance?

Yes, the premium amount for TROP is generally higher than traditional term insurance due to the return of premium features.

Can I customize my TROP Policy with Additional Riders?

Yes, you can enhance your TROP coverage by adding riders such as critical illness, accidental death, or disability riders, providing extra financial protection.

Is the Death Benefit Different in TROP Compared to Traditional Term Insurance?

The death benefit in TROP remains the same as traditional term insurance, providing a lump sum amount to the nominee in case of the policyholder's demise during the policy term.

What happens if I miss a Premium Payment in TROP?

The grace period for premium payment in TROP varies among insurance providers. If you miss a premium payment, you may have a grace period during which you can make the payment without the policy lapsing.

Can I surrender my TROP Policy and Receive the Premiums Paid before the Completion of the Policy Term?

Surrendering a TROP policy before the completion of the policy term may result in a reduced surrender value. It is advisable to review the policy terms and consult with the insurance provider before making a decision.

Can I renew my TROP Policy After the Completion of the Policy Term?

TROP policies do not usually have a renewal option as they are designed for a specific term. However, you can explore other life insurance options available at the end of the policy term.