Over the years, term insurance has evolved significantly. Today, insurance companies offer different types of term insurance. One such popular variant is the TROP or Term Insurance Plan with a Return of Premium. This plan works the same way as a regular term insurance policy, providing financial protection to the family if something happens to the policyholder.
But the main difference between TROP and a regular term insurance policy is that the former offers a maturity pay out. Under a term plan with a return of premium, you are eligible to get the premium back at the end of the policy term, provided you survive or outlive the policy tenure.
Also, like a standard term plan, TROP offers death benefits to your nominee in the event of your unfortunate demise during the policy period. Let us look at how it works and its benefits.
Working of term plan with return of premium
Let us assume Miss. Alka is a 30-year-old working professional. She is healthy, lives an active lifestyle, and has no history of medical issues. She buys Term Insurance with a Return of Premium with a sum assured of ₹20 Lakhs.
She pays a premium of ₹2000 per month for a 10-year plan. Now, if Miss. Alka passes away during this period, then her family member will receive ₹20 Lakhs. But if Miss. Alka survives the policy term, then she will get a maturity benefit of ₹240,000 (10×24,000).
Benefits of term plan with a return of premium
The most obvious benefit of Term Insurance with a Return of Premium is that you get back the premium you pay over the years if you outlive the policy term. Depending on the premium you pay, this could be a substantial amount, and you can use it for any purpose you want.
Like a regular term insurance policy, TROP allows you to get high coverage for the family at an affordable premium. If something happens to you during the policy period, then your family gets the death benefit. They can use this amount to meet their everyday expenses and maintain their regular lifestyle even in your absence.
The premium you pay for the policy is eligible for tax benefit up to ₹1.5 Lakh under Section 80C. Also, the sum assured that your family may receive after your demise is fully tax-exempt.
You can enhance the scope of your TROP policy by purchasing riders of your choice. The riders are a cost-effective way to get protection against specific risks that are not covered under the regular policy. Some of the best riders you can have in your Term Plan include critical illness rider, permanent disability rider, etc.
Term plan with a return of premium – is it worth buying?
Term Insurance with a Return of Premium option is a new-age policy that is specifically designed for those who want to get returns from term insurance, don’t want to lose their money at any cost, and want to use the maturity pay out for long-term goals.
On the flip side, the purchasing power of the money you get back at the end of the term insurance would be lower due to the rising inflation. So, it is not really an investment.
But remember, the primary purpose of term insurance is to secure the family’s financial future against uncertainties. The maturity benefit is only an additional benefit. So, in a nutshell, TROP is worth investing in.
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