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Term Plan with Return of Premium Explained

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A term plan is the purest type of life insurance plan that secures the financial future of the policyholder’s family in case of any untoward incident. One of the best things about investing in a term life insurance policy is that it offers a high sum assured at an affordable premium. So, investing in this plan should be your utmost priority.

Term insurance secures the policyholder’s life for a specific tenure. Therefore, many people refrain from buying this policy, as they are worried about losing the premium amount if they outlive the tenure. Such people can invest in a term plan with a return of premium (TROP). This policy is specially designed to meet the needs of these policyholders. TROP is similar to your term plan. However, a unique benefit of investing in it is that you can get the survival benefit in the form of the aggregate premium paid throughout the plan’s duration. Let us understand how TROP works.

Assume that a policyholder has purchased a TROP with a life cover of INR 1 crore for 20 years at an annual premium of approximately INR 10,000. Here, if he or she dies untimely during the policy period, the policy’s nominee will receive the death benefit of INR 1crore. However, if the policyholder survives the tenure, the insurer will have to pay back the premium of INR 2 lakh (20 years x INR 10,000), without any interest.

When compared to a traditional term life insurance plan that only provides a death benefit, a TROP offers survival benefits if the policy matures. The premium of a TROP policy is comparatively higher than conventional term plans, as you get the amount if you outlive the plan’s period.

Features of a TROP

Here are a few offerings of a TROP:

  • Sum assured 

TROPs provide a higher sum assured compared to other life insurance policies. However, the sum assured is lower than a traditional term insurance policy. It is because the insurer returns the total premium that you paid during the policy tenure once the plan matures.

  • Death benefit 

If any unfortunate event occurs during the policy tenure, the insurer will pay the death benefit, which is the sum assured to your family members. You can decide whether you want your loved ones to receive this amount asa one-time lumpsum or at regular intervals.

  • Survival benefit 

Traditional term plans donot provide any maturity benefits if you outlive the policy tenure. Conversely, if you invest in TROP, you are entitled to get survival benefits. This unique feature makes it a standalone term insurance plan.

  • Riders 

You can also opt for various riders like accidental death, critical illness, and accidental disability to widen the coverage of your policy.

What are the age-related conditions to invest in TROP?

The minimum age to invest in TROP is 21, whereas the maximum age is 55. Apart from age, tenure and sum assured play a key role in determining the term insurance premium.

What is the policy tenurein TROP?

When compared to other life insurance policies that provide life cover until the demise of the policyholder, a TROP only offers cover for a specific duration. The tenure may range from 10 to 30 years. This period may vary from insurer to insurer. However, usually, the maturity age for TROP is approximately 70.

Now when you know what is term plan and how it is different from TROP, it is time to invest in any of these policies as per your preference and needs. If you want monetary benefits on survival, investing in a TROP can be a wise idea.