Premium return protection plan is one of the most popular insurance plans because of its unique return policy. It offers a lump sum payment if the policyholder outlives the period of the policy. This amount equals the premiums paid towards the policy and the interest accumulated.
Key Takeaways
- Premium return protection plan offers life insurance coverage for loved ones, plus the potential for a premium refund if you outlive the policy term.
- If you outlive the policy period, you receive an amount equal to the premiums paid over the duration and accumulated interest.
- If you cancel the policy before term completion, it may result in a partial refund of premiums.
- Consider your needs before choosing this policy, and assess your financial goals to determine if it is the right fit for you.
A premium return protection plan or Term Insurance with Return of Premium (TROP) is a unique insurance product tailored to cater to the specific needs of policyholders. Like traditional term insurance, it offers financial protection for the insured’s family in emergencies. However, what sets it apart is its additional benefit of survivor rewards.
Understanding the Premium Return Protection Plan
Premium return protection plan resembles standard term insurance policies but stands out by reimbursing 100% of the premiums paid when the policy matures, commonly referred to as the “survival benefit.” This reimbursement is tax-free, which effectively reduces the net cost of the policy.
How Does Premium Return Protection Plan Work?
Return protection plan premiums are typically higher due to a portion of the premium being set aside in a savings account with interest accrual. If the policyholder outlives the term, they get a lump-sum payment equal to the total premiums paid over the term plus accumulated interest.
Let us understand this with an example:
If you purchase a 20-year premium return policy with a death benefit of ₹5,00,000 and a monthly premium of ₹100, you will pay a total of ₹24,000 in premiums over 20 years. If you pass away during this period, your beneficiaries will receive the ₹500,000 death benefit. However, if you survive the term, you receive a lump sum of ₹24,000, which covers your premiums and interest paid.
Benefits of Term Insurance with Premium Refund
Term insurance with a premium refund option offers various advantages to the policyholders. These benefits make this policy an attractive option to the buyers.
The following are some of the benefits of this policy:
Maturity Benefit or Survival Benefit
A premium return plan differs from traditional term insurance by offering a maturity or survival benefit. If the policyholder outlives the insurance term, the entire premium is returned as a survival reward, whereas a conventional term insurance plan does not provide such benefits.
Surrender Value
The surrender value of a Premium Return Protection Plan is a significant benefit for policyholders as it offers financial flexibility, particularly for single premium policies, which often yield higher surrender values. It allows policyholders to exit the policy prematurely if their financial needs change or if the policy no longer aligns with their goals. This feature also enables informed decision-making before purchasing a policy, providing peace of mind and serving as a valuable safety net for policyholders, enhancing the overall appeal of the insurance product.
Death Benefit
In the unfortunate event of the insured individual’s demise during the policy term, the return premium plan provides the complete sum assured amount to the beneficiary, determined by the chosen coverage, premium payment term, and method.
Parting Words
A premium return protection plan combines financial protection benefits with the potential for a premium refund, offering a valuable option for policyholders. However, it is essential to carefully consider the pros and cons and assess your financial goals before choosing a premium return policy. This way, you can enjoy the benefits of this plan without worrying about your future.
