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Kotak e-Term Plan

Term Plan with Return of Premium (TROP)

Term Insurance Plan with Return of Premium: In TROP life insurance, you receive the entire premium that you paid at the time of maturity. Click to know more.

  • Jun 20, 2019

What is Term Plan with Return of Premium (TROP)?

Customers who wish to give their loved ones financial stability, as well as the benefit of returns, can purchase a term plan with a return of premium (TROP). As the name implies, Term Return of Premium provides both insurance coverage and a return of premium benefits.

If you live through the policy’s tenure, term life insurance plans with Return of Premium (or TROP) pay back the whole annualised premium amount paid toward the policy as a maturity benefit.

How Does Term Plan with Return of Premium Work?

A term plan with a return of premium is comparable to a regular term plan in most ways. It serves as a life insurance policy and pays a death benefit to its beneficiaries. The maturity benefit applicable to a term plan with a return of premium is the distinguishing factor that makes it unique.

The main advantage of term insurance with return of premium, or TROP, is that the policyholder receives a full refund of all premiums paid during the course of the policy upon maturity. When the insured person dies, a standard term insurance plan pays the sum assured. Other than the amount assured, there are no payments.

Why Should You Buy Term Plan with Return of Premium?

The main advantage of term insurance with return of premium, or TROP, is that the policyholder receives a full refund of all premiums paid during the course of the policy upon maturity. When the insured person dies, a standard term insurance plan pays the sum assured. Other than the amount assured, there are no payments.

Life insurance is an effective investment instrument to help you build wealth. However, more importantly, it is a primary source to ensure the financial well-being of your family in your absence. This is why a life insurance policy is an important part of your portfolio.

One qualifies for tax advantages by buying a term plan with a return of premiums. According to the current tax legislation, you can use the benefits. The term plan premium and benefit amount are tax-free under Sections 80C and 10 (10D).

Difference between a traditional term insurance policy and a life insurance policy

It is very important to understand the difference between a traditional life insurance policy and a term insurance policy. A term insurance cover will ensure that your loved ones are financially secure in your absence, and the sum assured will be paid to the nominees in case of an untoward incident. You do not receive any maturity benefit in case of your survival.

On the other hand, in the case of a traditional life insurance policy, you receive a maturity benefit in case of survival.

Overview of Return of Premium (ROP) option with life insurance plans

Numerous insurance providers offer the Return of premium (ROP) option with a traditional term plan. To avail of this option, you might have to pay a higher premium amount. However, you will be able to receive the entire amount that you have paid as a premium during the term of the policy at the time of maturity of the plan.

This option does sound to be beneficial over a long period. You can also consider investing in a ’Return of Premium Term Life Insurance Plan. Since the return is guaranteed after the plan’s maturity, the amount invested can be treated as a return.

Advantages of ROP with a life insurance plan

An ‘ROP life insurance plan’ can be considered a guaranteed returns plan. You can invest in such a plan as per your risk appetite. This plan gives you non-risk evaluated guaranteed benefits. It is very different from market-linked investment instruments. It is an ideal option if you wish to earn fixed benefits while playing a higher premium. It can be an ideal investment instrument to help you achieve your long-term goals.

You need to remember that the ‘ROP life insurance plan will cost you more, as you need to pay a higher premium each year. You need to consider the plan only if it fits your needs. If you have a low-risk appetite and want to earn income at the end of the policy term, this plan is suitable for you. In the case of a term plan, you only get a life cover and no return of premium, but if you chose a term insurance plan with an ROP option, you would receive the premium amount after the policy matures.

You can start investing in an ‘ROP life insurance plan’ by keeping your financial goals in mind. This will allow you to fulfil your goals at the end of the policy term. Compare the cost and benefits of this feature before you make a decision. Always consider your personal requirements and investment purpose before investing in the plan.

Frequently Asked Questions (FAQs)

What does return of premium mean?

If the policyholder does not pass away within the specified term, a return of premium rider entitles the policyholder to a refund of the premiums paid. The net cost to the policyholder is virtually zeroed out as a result. Return of premium life insurance is another name for a policy that includes a return of premium clause.

Is Term Plan with return of premium option worth it?

The main advantage of term insurance with return of premium, or TROP, is that the policyholder receives a full refund of all premiums paid during the course of the policy upon maturity. When the insured person dies, a standard term insurance plan pays the sum assured. Other than the amount assured, there are no payments.

What are the benefits provided by term insurance plans with return of premium?

Additional benefits offered by term plans with return of premium options include premium waivers, benefits for accidental death and incapacity, and protection from serious illnesses. For policyholders, investing in TROP might increase their sense of overall protection.

Can you get your money back from term insurance on maturity?

The insurer uses every penny you pay, excluding a few small administrative fees, to safeguard your financial future. Term plans therefore do not offer maturity advantages.

Are there riders available on term plan with return of premium?

The possibility of a rider benefit to increase the policy’s coverage is provided by the term insurance return of premium plan. Most insurance providers offer a variety of add-ons that customers can choose from. These can be added later or taken at the time of policy enrolment.

Does smoking affect term plan with return of premium?

Smokers might secure the financial security of their loved ones in their absence with a term plan. Smoking does not preclude you from purchasing a term plan, but after comparing term insurance plans, it is clear that giving up smoking for good would be very advantageous.

Should I buy a regular Term insurance plan or Term plan with return of premium (TROP)?

The main advantage of term insurance with return of premium, or TROP, is that the policyholder receives a full refund of all premiums paid during the course of the policy upon maturity. When the insured person dies, a standard term insurance plan pays the sum assured. Other than the amount assured, there are no payments.

Kotak e-Term Plan

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  • Nominal Cost
  • Multiple Plan Options
  • Flexible Payout Options
  • Critical Illness Rider
  • Tax Savings
  • Long term Coverage

Ref. No. KLI/22-23/E-BB/492


- A Consumer Education Initiative series by Kotak Life

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