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Ref. No. KLI/22-23/E-BB/492
The premium return protection plan is one of the best insurance plans. It guarantees the return of money invested after the policy completion. Read this blog ahead to learn more.
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.
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.
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.
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.
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:
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.
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.
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.
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.
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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
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Ref. No. KLI/22-23/E-BB/2435
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.
