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

A Term Plan with Return of Premium (TROP) is a popular variant of traditional term life insurance. Like a standard term plan, it provides a death benefit to your nominee if you pass away during the policy term. However, TROP adds a unique survival benefit: if you outlive the entire policy tenure, the insurance company refunds all the premiums you have paid. This plan solves the core complaint of standard term insurance, where you get nothing in return if you survive the term. It gives you protection and a guaranteed return.

How Does a Term Insurance Plan With Return of Premium Work?

Let us understand this with a practical example.

Consider Mr. Verma, a 30-year-old non-smoker, who wants to secure his family’s future. He opts for a Term Plan with Return of Premium (TROP) with the following details:

• Sum Assured: ₹1 crore
• Policy Term: 30 years (coverage until he is 60 years old)
• Annual Premium: ₹25,000 (excluding taxes)

Over the 30-year policy term, Mr. Verma will pay a total of ₹7,50,000 (₹25,000 x 30 years).

Now, there are two possible outcomes at the end of this journey:

Scenario 1: The policyholder passes away during the term

If Mr. Verma unfortunately passes away at any point during the 30-year policy period, his nominee will receive the full sum assured of ₹1 crore. The policy will then terminate, having fulfilled its primary purpose of providing financial protection.

Scenario 2: The policyholder survives the term

If Mr. Verma lives through the entire 30-year policy term, he successfully reaches the age of 60. In this case, since he survived, the “Return of Premium” feature gets activated. The insurance company will refund the entire premium amount he has paid. He will receive ₹7,50,000 back from the insurer, and the policy will mature.

Here is a simple table to summarize how it works:

Who Can Buy Term Insurance with Return of Premium (TROP)?

Term insurance return of premium protects your loved ones and refunds your payments when the policy ends. You should consider this plan if you are:

Single

A TROP is a smart financial move for single individuals. Life insurance might not seem urgent, but you need to think ahead, as life is unpredictable. This plan guarantees financial protection for future dependents, like your parents or a future spouse.

Married

Married couples gain major protection and financial stability with this plan, especially when building a life. You share loans, bills, and lifestyle costs. A sudden loss of income is a devastating risk. This is term insurance with money back. It gives the surviving partner the full sum assured and acts as direct financial support.

Married and Have Children

Having children makes life insurance a top priority. Your financial responsibilities multiply. You must cover everything from daily bills to their future education, as any loss of your income may create a huge impact on their lifestyle. A return of premium term plan is a powerful tool for parents. It secures your children’s future and gives you back your investment if you survive the term.

Benefits of Term Insurance with Return of Premium

A term policy with return of premium is a combination of life insurance and savings. It creates complete financial security. It gives your family a safety net and returns your paid premiums when you survive the policy.

Here is a closer look at the return of premium ​​term insurance benefits:

Maturity Benefit Or Survival Benefit

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.

Sum Assured

For the same sum assured, TROP premiums are higher than a standard term plan. This is the cost of the refund guarantee. 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.

Surrender Value

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.

Death Benefit

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.

Additional Rider Benefits

You can add riders to your TROP plan. These include critical illness coverage, accidental death benefits, and premium waivers. These add-ons strengthen the policy against specific risks.

Why Should You Choose a Term Plan with Return of Premium Option?

A term insurance return of a premium plan delivers life protection and secures your premium investment. Here are some compelling reasons to consider this type of insurance:

1. Offers a Refund Of the Premium Upon Surviving The Policy Term

This plan does what traditional term plans cannot. You outlive the policy term, and you get all your premiums back, minus taxes and rider fees. Your money is never lost. You get peace of mind along with a savings component.

2. Coverage ​​​​Against Life-Threatening Illnesses

Choosing a term insurance plan with a return of premium option that includes​​​​ coverage against critical illnesses offers crucial financial protection beyond standard life cover. This type of plan provides a lump sum payout upon diagnosis of any specified life-threatening illness such as cancer, heart attack, stroke, or kidney failure, helping policyholders address the high costs of treatment and associated expenses. This rider ensures that your treatment and health needs can be prioritised without financial stress, thus enhancing your chances of survival and a smoother recovery.

3. Option To Increase Coverage According To Life Stage

A Term Plan with Return of Premium lets you increase your life cover at major life milestones. Getting married or having a child is a perfect example. Choose this feature at the start of your policy. Your insurance will then adapt to your changing responsibilities and give you adequate protection.

4. Benefits Under MWPA

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.

Features of a Term Plan with Return of Premium

To choose the right term plan with return of premium, you must understand its built-in benefits. The features create a balance of protection and savings that standard term plans lack. The table below details these features:

How to Choose the Best Term Insurance with Return of Premium?

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 while choosing the money back term life insurance:

• First, calculate the right sum assured. List your family’s financial needs. This includes daily expenses, all loans, and long-term goals. Get enough coverage to fully support them if you are gone.
• A high ​​Claim Settlement Ratio (CSR) over many years shows an insurer is reliable. This number shows the percentage of claims the company actually pays. A good CSR means your beneficiaries will face fewer hassles.
• TROP premiums are higher than pure term plans. This is the cost of getting your money back. Check your budget. You must be able to afford the premiums for the entire term without financial strain.
• Pick an insurer with flexible payment schedules. Monthly, quarterly, semi-annual, or annual options should match your cash flow. Your policy term must cover you until you plan to retire.

Difference Between Term Insurance and Term Insurance With Return of Premium

While both plans offer the core benefit of life insurance, they cater to different financial mindsets. The primary difference lies in what happens if you survive the policy term.

Here’s a clear comparison to help you understand:

How much Term Insurance with Return of Premium Cover Do I Need?

Figuring out your sum assured is a critical step. Your calculation must be based on a hard look at your finances. Use these factors to get your ideal cover amount:

Your Annual Income:

A common rule is to get coverage of at least 10 to 15 times your annual income. This large amount helps your family maintain their lifestyle.

Your Outstanding Liabilities:

List all your debts. Home loan, car loan, personal loans. Your life cover must be large enough to wipe out these debts completely.

Your Family’s Future Financial Goals:

Factor in your major life goals. Calculate the costs for your children’s college education, weddings, and other big future expenses.

Your Existing Savings and Investments:

Subtract the value of assets you have already saved for these specific goals. This reduces the total cover you need to buy.

Provision for a Retirement Corpus:

Include an amount that can be invested. It must generate a steady income stream for your spouse’s retirement.

How to Buy a Term Plan with Return of Premium Online?

Buying a TROP plan online is a simple, quick, and convenient process. Here is a step-by-step guide to help you through it:

1. Visit the Insurer’s Website: Start by going to the official website of the insurance company you have chosen.

2. Select Your Plan Details: Choose the amount of sum assured​​​​ you need and the policy term (duration of coverage). Be sure to select the “Return of Premium” option from the available plan variants.

3. Fill the Application Form: You will be directed to an online application form. Fill it out accurately with your personal, contact, and health-related information.

4. Upload Required Documents: You will be prompted to upload digital copies of your KYC documents, which include an identity proof (like a PAN card), address proof (like an Aadhaar card), and income proof (like salary slips or ITR).

5. Make the Payment: Once the form is filled and the documents are uploaded, proceed to the payment gateway to pay the initial premium using a debit card, credit card, or net banking.

6. Medical Examination (If Required): Based on your age and the sum assured, the insurer may schedule a tele-medical or a physical medical check-up, often at no cost to you.

7. Policy Issuance: After verifying all the details and the medical reports, the insurance company will approve your application and issue the policy document, which will be sent to your registered email address.

Final Thoughts

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 the ​​term insurance age limit, 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 guaranteed bonus tomorrow.

FAQs on Term Plan with Return of Premium