Term insurance is a basic form of life insurance that provides financial protection to your family in case of your untimely demise during the policy term. It is designed to offer a significant life cover at an affordable premium. A variant of this is term insurance with return of premium, colloquially referred to as TROP. It combines the benefits of pure term insurance with a return of the premiums paid if the policyholder survives the policy term.
How Does Term Insurance with Return of Premium Work?
In a level term insurance plan, if the policyholder survives the policy term, the premiums paid do not yield any returns. In contrast, with a TROP plan, if the policyholder outlives the policy duration, the insurance company returns the total premium amount paid during the policy tenure. This premium return is exclusive of any charges or fees drawn from the paid amount. This makes TROP an attractive option for those seeking risk coverage along with a guaranteed return.
Key Features of TROP
Here are some of the key features of TROP policy.
- Life Coverage with Premium Refund
If the policyholder passes away during the policy term, the nominee receives the sum assured, just like a regular term insurance. If the policyholder survives the term, subject to conditions such as complete payment of premiums, the premiums are refunded.
- Flexible Premium Payment Options
TROP plans generally offer a range of premium payment terms, including single payment, limited payment, or regular payment options, allowing flexibility based on the policyholder’s financial situation.
- Term Insurance Tax Benefits
Premiums paid under a TROP plan as well as the death benefits received are eligible for tax exemptions.
Benefits of TROP
While the premium costs for TROP plans may be slightly higher as compared to level term life insurance plans, they tend to offer some attractive benefits.
· Financial Security
TROP provides life coverage, ensuring financial support for the policyholder’s family in case of death during the policy term.
· Return of Premium
One of the most significant advantages of TROP is the return of premiums paid, subject to conditions defined by the policy provider. This allows you to secure your family’s future without paying a hefty price.
· Optional Riders
Riders like accidental death, critical illness, or waiver of premium can be added to enhance the coverage. These come at an additional cost to the premium.
Who Should Choose TROP?
If you are considering a simple life insurance which is low cost and frill-free, a term insurance plan with a return of premium option may be a suitable bet. These plans are best suited for individuals who:
Ø Want to secure their family financially but also want their premiums returned if they survive the policy term.
Ø Are looking for a balance between life coverage and savings.
Ø Seek a life insurance plan with added maturity benefits.
Term insurance with return of premium provides the dual advantage of life protection and a guaranteed return on premiums, making it ideal for those who want financial security without the risk of losing their paid premiums. Combining the essential features of life insurance plan with a savings component, TROP offers a comprehensive solution for securing the future.
