Term Insurance Plan with Return of Premium – Work Process, Eligibility Criteria and Benefits of TROP


5 min read

A term insurance plan with a return of premium will offer a death benefit and takes better care of your family members in your absence. This type of plan fortifies the financial structure of your family.

Nowadays, the popularity of term insurance plans is getting sky-high as these plans offer financial security and stability to your family in your absence. But only a term plan may not meet all your requirements, thus, many policy buyers are looking for a term plan return of premium option to strengthen their family protection. Apart from giving protection to your family, this type of term insurance with return of premium offers many add-on benefits to policyholders.

What Do You Mean by Term Life Insurance with Return of Premium?

A term insurance plan with return of premium works as a life cover and embraces policyholders with death benefits. Under this type of return of premium term life insurance plans, beneficiaries are eligible for death benefits.

To enjoy the benefits of return of premium life insurance plans, a policyholder needs to pay some extra premium amounts against their plans. Every policy buyer can select the sum assured amount along with the policy tenure period as per their convenience. After the maturation of your policy plan, the insurance provider will repay all the paid premiums to the policyholder.

Who are More Interested in Buying a Term Life Insurance Policy with Return of Premium?

Primarily, two types of policy purchasers are interested in buying the best term life insurance with return of premium.

  • Policy purchasers who prefer a medium of savings apart from life coverage
  • Policy buyers who are looking for life cover to support financially to their family members in the case of their untimely death

Depending on your needs, you are free to choose the term plan return of premium that satisfactorily meets every need of your family member.

Why is there a difference in term plan premiums of various companies?

How does Return of Premium Term Life Insurance Work?

Before buying a term plan with a return of premium, you should be clear about your financial goals and future objectives. If you don’t know how a term plans with a return of premium work, then you can’t prepare your financial strategies properly.

Let’s elaborate with the example of Sanjay, a 28-year-old guy who stays with his family in Bhopal. Sanjay is planning to get married within a year and thus, he wants to strengthen the coverage for himself. Sanjay is healthy and doesn’t have any pre-existing health issues. Moreover, he doesn’t smoke or drink. Sanjay wants to purchase a term plan with a return of premium option and thus, he opted for a sum assured amount of Rs. 50 lakh.

If the tenure period is 40 years, then for this plan, his premium amount would be Rs. 12,718. But in case of the untimely death of Sanjay within this tenure period, his nominee will receive the sum assured of Rs. 50 lakhs.

But, if Sanjay lives the policy term period, then he will get maturity benefit under this return of premium plan. In this scenario, Sanjay will receive Rs. 508,720 (12718 x 40) after the maturation of the plan.

Who is Eligible to Purchase Term Life Insurance Plan with a Return of Premium?

Before opting for a term plan with a ROP option, you should ponder some constraints like your age, annual income, plans and healthcare conditions.

1. Unmarried:

When you are not married but have some responsibilities towards your older parents, then you should pick up a term plan with a return of premium. The maturity benefits could be beneficial for your parents as they will get a lump sum amount. In case of your untimely demise, the death benefit amount will help your parents to meet up their expenses. If you overpower the policy tenure, then the insurer will return all your premium amounts.

2. Married with no children:

When you are married and your spouse depends on you financially, then a TROP plan will bring a smile to your face. To increase your spouse’s financial stability, you should select this type of term plan. You may get an added advantage when you will receive the maturity benefit at the end of the policy tenure.

3. Married with children:

When you are the only breadwinner of your family, then it’s your responsibility to manage the needs of all family members. You need to single-handedly manage everything like your children’s school fees, their higher studies, marriage plan, and many more. You may face difficulties in managing everything from your own pocket. Here comes a term plan with a return of premium option which offers maturity benefits.

Top 3 Benefits of Term Life Insurance Plan with Return of Premium

Let’s take a look at some of the benefits of a term plan with a ROP:

1. ROP Benefit 

Many policy purchasers won’t prefer a term plan because it doesn’t offer any maturity benefit. But term plans that come up with ROP benefits are highly appreciated by customers. This ROP makes their purchase decisions worthy.

2. Death Benefit

The core purpose of buying a term plan with a ROP is life cover. This type of plan embraces policyholders with additional protection for their family members in their absence. The death benefit will help family members to fulfill their requirements at the time of a crisis.

3. Tax Benefits

Once you purchase a term plan with a ROP, you will be eligible for tax benefits. According to the Income Tax law (Section 80C and 10 (10D), you will enjoy all the tax benefits. The premiums are also tax-free under this type of plan. With this type of term plan, you will be eligible for a tax deduction of up to Rs. 1.5 lakh on the premium.

Though term plans with a ROP could be expensive as compared to normal term plans, their benefits are unfathomable. To make your investment decision fruitful, you must choose the best term plan with the return of premium options that are available in the market.

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FAQs: Term Plan with Return of Premium

Is it good to buy term insurance with return of premium?

The term plan with return of premium, as its name implies, differs from conventional term plans in that it reimburses the annualised premium amount paid over the course of the policy. As a result, if you pass away unexpectedly during the policy's term, your family will receive the full amount guaranteed by the insurance policy.

What is a term plan with return of premium option?

If the policyholder outlives the policy term, a term insurance plan with return of premiums is a pure protection plan that offers to return all premiums paid. Other family members may be added by the policyholder for life insurance.

Is ROP life insurance worth it?

Because you will lose the chance to grow your money, return of premium life insurance is typically not cost-effective. Even though you do receive your money back at the end of the term, it won't be worth as much as it would if you had invested it or even just saved it in a high-yield savings account.

Which is better term insurance or life insurance?

When compared to whole-life or universal life insurance, term insurance pays out less money over a longer period of time. However, if you want to make sure that your family can maintain their lifestyle without worrying about having enough money for retirement in the future, it might still be something to think about.

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Jun 22, 2022
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PayBima Team
PayBima is an Indian insurance aggregator on a mission to make insurance simple for people. PayBima is the Digital arm of the already established and trusted Mahindra Insurance Brokers Ltd., a reputed name in the insurance broking industry with 17 years of experience. PayBima promises you the easy-to-access online platform to buy insurance policies, and also extend their unrelented assistance with all your policy related queries and services.

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