Term Insurance with Return of Premium (TROP)

Term Plan with Return of Premium Overview

Here’s a table summarising the key aspects of a term plan with a return of premium:

Feature Description
Plan A term life insurance policy that refunds the premiums paid if the policyholder outlives the term.
Premium Refund 100% of the premiums paid are refunded if the policyholder survives the policy term.
Death Benefit Paid to beneficiaries if the policyholder dies during the term.
Premium Cost Higher than standard term life insurance due to the refund feature.
Tax Implications Premium refunds are generally tax-free.
Cancellation There is no refund if the policy is cancelled before the term ends.
Riders Additional options like critical illness or accidental death can be added.

What is Term Plan with Return of Premium?

How Does Term Plan with Return of Premium Work?

What to Expect When Your Term Plan with Return of Premium Policy Matures?

Features and Benefits of Term Plan with Return of Premium

Who Should Buy Term Plan with Return of Premium Policy?

Some Relatable Real-Life Examples

Why Choose a Term Insurance Plan with Return of Premium

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

Eligibility Criteria for Term Insurance with Return of Premium

Several key factors exist when considering a term insurance plan in India, you typically need to meet the following criteria:

Criteria Details
Citizenship Indian citizens, NRIs, and PIOs can buy a term insurance plan in India.
Age Eligible age range: 18 - 65 years.
Health Status Insurers require medical tests to assess health risks before issuing a policy. Your medical history can influence term insurance premiums and the maximum sum assured.
Income There is no minimum income requirement. Bank statements and salary slips are needed to determine coverage and premium payment ability.
Occupation Professionals, salaried individuals, self-employed persons, and housewives. Certain high-risk occupations may be restricted.

Documents Required for Term Insurance with Return of Premium

To apply for a Term Insurance with Return of Premium (TROP) plan, you will typically need the following documents:

Document Type Required Documents
Age Proof
  • Passport
  • Voter ID card
  • Driving License
  • Birth Certificate
  • 10th/12th mark sheet
Identity Proof
Address Proof
  • Utility bills
  • Rent agreement
  • Passport
Medical Medical questionnaire, medical reports (if required)
Other Documents
  • Policy Proposal Form
  • Nominee Details
  • Photograph
  • Bank Account Details

Note: Depending on the insurance provider, each section requires one or two documents as proof.

How to Buy a Term Plan with Return of Premium Online?

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.

Tax Benefits for 10 Crore Term Insurance Policies

FAQs about Term Plan with Return of Premium (TROP)

Do I get my money back if I cancel my term insurance with a return of premium?

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No, if the policy is lapsed or canceled 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?

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

Are NRIs eligible to purchase term insurance in India?

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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?

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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?

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

Can I customise my TROP policy with additional riders?

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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?

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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?

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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?

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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?

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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.

What is the importance of term plans with return of premiums?

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Term plans with return of premium offer a unique advantage by returning the premiums paid to you upon policy maturity if you survive the policy term. This means you are financially protected for the policy duration without paying out-of-pocket costs.

Is term insurance with a return of premium worth buying?

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Whether a TROP is worth buying depends on your financial goals and risk tolerance. A TROP can be a good choice if you prioritise life insurance coverage and want to minimise expenses.

What are the eligibility criteria for a term plan with return of premium?

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Eligibility criteria for a TROP generally align with standard term insurance requirements, including age, health and occupation. However, specific criteria may vary between insurers.

What happens to the return of premium if I cancel the policy mid-term?

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If you cancel a TROP mid-term, you may not receive the full return of premiums. The amount returned will depend on the policy’s surrender value, which is typically lower than the premiums paid.

How do you choose the tenure of the TROP policy?

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The tenure of a TROP should be chosen based on your life expectancy and financial planning needs. Consider your retirement age, dependents’ financial requirements and mortgage obligations.

What is the death benefit under the return of premium term insurance plan?

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The death benefit under a TROP is the same as that of a regular term plan. The death benefit is paid to the nominated beneficiaries if the policyholder dies during the policy term.

Are there any riders available with TROP?

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Yes, various riders enhance the coverage of a TROP, such as accidental death and disability benefits, critical illness cover, and premium waivers.

How does smoking habit affect the term plan with return of premium?

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Smoking generally increases the premium for a TROP due to the higher health risks associated with it. However, some insurers offer special rates for smokers who quit or meet certain criteria.

What is the grace period in the term plan with a return of premium?

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The grace period for a TROP is typically 30 days. The policy may lapse if you fail to pay the premium within this period. However, some insurers offer reinstatement options within a specified period.

Is a term plan with a return of premium more expensive than a regular term plan?

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Yes, a TROP is generally more expensive than a regular term plan due to the additional benefit of returning the premiums upon maturity. However, the cost difference may vary depending on the insurer and policy terms.

What happens to the return of premium if the policy is surrendered before maturity?

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If you surrender a TROP before maturity, you may not receive the total return of premiums. The amount returned will depend on the policy’s surrender value, typically lower than the premiums paid.

How long does receiving the return of premium after the policy matures take?

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The time it takes to receive the return of premiums after a TROP matures may vary depending on the insurer’s processes. However, it typically takes a few weeks to a few months.

Disclaimer

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  • This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
  • All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
  • Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.

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