Term Plan with Return of Premium, also known as TROP, is the same as any other standard variant of term insurance plans with one key difference – the facility of return of premiums option i.e. survival benefit at the end of the policy term. This feature makes this plan a unique one. Otherwise, it is designed to provide financial protection against any eventuality to the insured and serve his different requirements.
The premium rate of the policy is determined based on the age of the individual, along with the other factors. The TROP plan can be purchased by any individual, irrespective of the fact whether (s)he is married/unmarried/widow.
To understand this term plan better, we have to look into the advantages. Let us move forward with its benefits.
There are various types of term plans and life insurance policies available in the market that offer returns, but they (in many cases) are market-linked and are not guaranteed.
TROP offers guaranteed returns (in terms of paid premiums) and its premium amount is higher than the standard term insurance policy.
In contrast to a pure term insurance plan, term insurance with return of premium offers survival benefits or maturity benefits i.e. if the insured outlives the plan, (s)he is eligible to get back all the premiums paid during the policy term, which makes it an ideal product for people, as this plan promises some kind of return from the policy.
The TROP provides a death benefit that is the total sum assured to the nominee in case of the demise of the insured person due to any eventuality. This amount varies from company to company, depending on various grounds.
Several rider benefits are offered by the different insurance companies under TROP and they are,
● Personal Accident or Disability Rider: If the insured meets an accident causing disability, injury, or even death, (s)he will be compensated for that by the company.
● Critical Illness Rider: This rider offers coverage for certain illnesses like cancer, heart attack, stroke, and many more. But the illnesses that are covered vary from company to company (based on the company’s TnCs).
● Hospital Cash: This rider provides certain cash benefits against hospitalization due to certain predefined illnesses.
This is a selling point of this plan. Under this, if the insured is unable to pay the premium amount, the plan continues with a lower cover. But most of the companies require the insured to pay the premium for a minimum number of years before availing of this benefit.
The premiums paid for the policy are eligible for tax deductions under Section 80C of the Income Tax Act, 1961. The payout is exempted from income tax under Section 10 (10D) as well.
|Parameters||TROP||Pure Term Insurance|
|Premium||The premium that is charged by the insurer is comparatively higher under this plan||The premium rate of the pure term insurance plan is considerably lower and affordable as compared to ‘TROP.|
|Benefits||TROP offers insurance coverage as the death benefit. But if the insured survives the policy term. (s)he gets back all the premiums paid over the tenure on the completion of the policy term.||In the case of a pure term insurance plan, only the death benefit is offered as the insurance coverage.|
|Who should buy?||Term Insurance Plan with Return of Premium is ideal for those who want to gain some returns along with the benefit of insurance coverage.||This plan is best for those who just want to provide financial protection to the family.|
Buying a TROP plan could be a win-win deal as it assures you to secure the lifestyle of your loved ones in your absence and promises to return premiums as a maturity benefit. But you shouldn’t buy a policy only based on maturity benefit. The decision to purchase term insurance should be based on your needs and your ability to pay the premium amount.