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A Term Plan with Return of Premium (TROP) offers a compelling dual advantage: robust life cover and a return of the premiums paid if the policyholder survives the term. This means your loved ones receive financial protection in case of your untimely demise, or you get your premiums back upon outliving the policy duration. It is a plan designed for those seeking both security and a money-back benefit at maturity.
A Term Plan with Return of Premium (TROP) is a specialized variant of a term insurance plan. While standard term insurance offers a death benefit to your nominees if you pass away during the policy term, TROP goes a step further. It not only provides life cover but also includes a unique maturity benefit: the return of all premiums paid if you, the policyholder, survive the entire policy duration.
The mechanics of a TROP are straightforward: you pay regular premiums for a set policy duration. If an unfortunate event occurs during this time, your nominee receives the pre-decided sum assured. However, if you survive the policy term, the insurer refunds all the base premiums you have paid. It excludes taxes, rider premiums, and any extra underwriting premiums.
These benefits of a money back term life insurance help you secure your family's financial future against uncertainties while also offering a form of disciplined savings. The life coverage ensures your loved ones are protected, and the return of premium feature provides a guaranteed lump sum at maturity if you outlive the policy, which can be useful for various financial goals.
Choosing the right insurance can feel complex, but a TROP plan simplifies things by offering clear advantages, such as:
When you buy term insurance with return of premium, you pay premiums for a specific duration, usually 5 to 30 years. If the policyholder passes away during this period, the beneficiaries receive the sum assured. However, if the policyholder survives, they get back the total premiums paid, often with added benefits like interest or bonuses, depending on the policy.
The dual benefit of a term plan, along with maturity benefit and return of premium, makes term insurance with return of premium highly advantageous.
Let us take the example of Ms. Asha, a 25-year-old who opted for a term insurance with return of premium with an annual premium of ₹20,000, a sum assured of ₹80 lakh, and a policy term of 20 years. In this case, Ms. Asha has to pay ₹20,000 every year for 20 years.
This structure allows her to benefit from both life insurance protection and savings, making term insurance with return of premium an ideal option. Such a plan is also called money back term life insurance and is ideal for people who want life protection but also wish to secure their premium amount if nothing happens to them.
Term insurance with return of premium is an excellent option for those who want to protect their loved ones in the event of their untimely demise while also receiving a refund of their premiums at the end of the policy term. You can buy such a plan if you are:
For single individuals, term insurance with return of premium (TROP) offers a smart, dual-purpose financial strategy. While life insurance may not seem necessary initially, thinking ahead is key. Life is unpredictable, and a TROP plan ensures that any future dependents, like aging parents or a spouse, are financially protected in case of an untimely event.
Term insurance with return of premium offers protection and financial stability for married couples, especially those building a future together. With shared financial responsibilities like home loans, car payments, and lifestyle costs, a sudden loss of income could be devastating. TROP is like term insurance with money back that ensures that even if one partner passes away during the term, the other will receive the sum assured, offering crucial financial support during a difficult time.
When you have children, the need for life insurance becomes even more critical as your financial responsibilities increase significantly. From covering daily expenses to securing their education and future, any loss of income can severely impact the family. A return of premium term plan is an excellent choice for parents who want to ensure their children’s future is secure while also getting a return on their investment if they outlive the policy term.
Term policy with return of premium offers a unique blend of life insurance and savings, making it an attractive choice for those seeking comprehensive financial security. Unlike standard term plans, term policy with return of premium provides a safety net for your loved ones in case of an unfortunate event and ensures that the premiums you have paid are returned to you if you outlive the policy term.
Here is a closer look at the return of premium term insurance benefits:
One of the standout features of a Term Plan with Return of Premium is the maturity benefit, also known as the survival benefit. Unlike traditional term insurance, where no amount is paid if the policyholder survives the term, a TROP refunds the total premiums paid, excluding taxes and rider charges, at the end of the policy tenure. This ensures that your investment does not go unused and provides a financial cushion that can be used for future goals such as retirement, a child’s education, or even a planned expense. It is an ideal solution for those who want insurance protection along with a guaranteed return of their premiums.
The term policy with return of premium gives a lesser sum insured amount than a pure protection plan because the policyholder receives their premium refund. It combines protection with a savings element, providing a balance between coverage and financial security. The lower sum assured is offset by the certainty of getting your money back, giving policyholders the peace of mind that they will either be covered or compensated.
The surrender value of term insurance under a Return of Premiums plan varies depending on the policyholder’s payment method. The surrender value is offered more for single premium policies where the entire insurance premium is paid at the time of application. Insurance companies calculate the surrender value based on several variables.
In TROP, when the insured individual passes away during the policy term, the death benefit is offered to the policy beneficiary as the sum assured amount. The sum guaranteed is determined by the kind of coverage and the premium payment method selected by the policyholder when the policy was purchased.
TROP plans offer the flexibility to include riders like critical illness coverage, accidental death benefits, and premium waivers. These add-ons enhance the policy, delivering tailored and comprehensive protection against different uncertainties.
A term insurance return of premium plan not only ensures life protection but also secures your invested premiums, making it a dual-benefit offering. Here are some compelling reasons to consider this type of insurance:
Unlike traditional term plans that only offer death benefits, this plan ensures that if you outlive the policy term, you receive back all the premiums paid (excluding taxes and extra charges for riders). This means that your money is not lost, even if you do not end up claiming the cover, offering both peace of mind and a savings component.
The Kotak e-Term Plan offers additional protection through the Kotak Critical Illness Plus Benefit Rider. Upon diagnosis of any of the 37 listed critical illnesses, a lump sum payout equivalent to the Rider Sum Assured is made. The base policy continues even after this payout. In the event of an angioplasty, a minimum of ₹5 lakhs or the Base Rider Sum Assured is paid, while coverage for the remaining illnesses stays active. The rider terminates once the full benefit is paid or the rider term ends, whichever comes first. This ensures timely financial support during health emergencies.
A term plan with return of premium allows flexibility to increase your life cover as you progress through major milestones such as marriage or the birth of a child. By opting for this feature at the start, you can ensure that your insurance adapts to your changing responsibilities and provides adequate protection throughout your life.
If the plan is endorsed under the Married Women's Property Act (MWPA), it ensures that the policy benefits, both the life cover and the survival refund, are legally protected and can only be claimed by your nominated beneficiaries (spouse and children). This adds an extra layer of financial security for your family, shielding the benefits from any external claims.
When selecting the term plan with return of premium, it is important to understand its various built-in benefits. These features offer a balance between protection and savings, setting it apart from standard term insurance plans. Here is a detailed comparison presented in a structured table format:
|
Feature |
Description |
|
Affordability |
A term plan with return of premium returns all paid premiums (excluding taxes and rider charges) as maturity benefits. Additionally, these refunds are tax-exempt, making the plan a cost-efficient choice. |
|
Premium Payment Options |
Choose from multiple options under the term insurance with return of premium plan: Single Pay: Pay the total premium in one go. Regular Pay: Pay at regular intervals (annually, semi-annually, quarterly, or monthly). Pay till 60: Pay premiums till age 60, while coverage continues up to 85. Limited Pay: Pay premiums for a limited period while keeping the policy active for the full term. |
|
Guaranteed Premium Return |
With TROP, policyholders are assured a full refund of premiums paid upon survival till the end of the term (excluding extra rider premiums), providing financial reassurance. |
|
Maturity Benefit |
Survival till the policy term's end ensures a maturity benefit equal to the total premium paid, safeguarding the investment made in the term life insurance with return of premium. |
|
Surrender Value |
If the policyholder decides to exit early, the plan offers a surrender value, calculated based on the premium type: Single Pay: Eligible for surrender value after premium payment. Limited/Regular Pay: Eligible after paying premiums for at least 2 years. |
|
Paid-Up Option |
Designed for non-earning individuals, this option allows continuation of the return of premium term life insurance with reduced cover if premiums can no longer be paid. However, a minimum number of premiums must be paid to activate this feature. |
Selecting the right Term Insurance with Return of Premium (TROP) plan requires a thoughtful approach to ensure it aligns perfectly with your financial protection needs and goals. Here is what to focus on:
Ultimately, a Term Plan with Return of Premium is not just an insurance policy; it is a thoughtful financial strategy with dual benefits. It diligently protects your loved ones against life's uncertainties while simultaneously rewarding your discipline by returning your premiums if you outlive the term. By understanding its mechanics and carefully choosing a plan, you can secure not just your family’s future but also a tangible financial benefit for yourself down the road. It is about ensuring that your hard-earned money works smartly for you, providing security today and a welcome bonus tomorrow.
1
A Term insurance plan with return of premium combines life insurance (death benefit) with a savings element. You get a payout of your total premiums if you survive the policy term.
2
TROP premiums are higher than regular-term plans because you get your money back if you outlive the policy duration.
3
People who want life insurance protection and their premiums back if they outlive the policy term can opt for term insurance with return of premium.
4
Getting a loan against a Return of Premium plan depends on the specific plan and insurer. You have to check with your insurance company.
5
Similar to regular term plans, riders offering additional coverage (disability, critical illness) may be available.
6
Like any other life insurance, premiums paid for your term insurance plan with return of premium can be deducted from your taxable income under Section 80C of the Income Tax Act, 1961, with a maximum annual benefit of ₹1.5 lakhs.
Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
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