These days, many buyers prefer a term plan. A simple term plan provides financial coverage for a set time. Most people benefit from a standard term insurance plan, but a return of premium plan might offer more benefits. A term plan with a return of premium component is comparable to a normal term plan. However, the survivor benefit distinguishes it from term insurance plans. Policyholders can claim survival benefits and insurance premiums (excluding GST). This plan offers disability, accidental passing away, and critical illness coverage.
What is TROP?
TROP stands for a Term plan with a Return of Premium. The Return of Premium term plan is similar to a standard term plan. It covers the life and pays beneficiaries after the untimely passing away of the policyholder. The maturity benefit for term plans with a premium return distinguishes it from a standard term plan. Paying more for a term plan with return of premium benefits policyholders. As the term plan with the return of premium matures, the insurer will refund the premiums.
Policy purchasers fall into two categories:
- One seeking savings and life insurance
- One who needs life insurance just to provide for their family
How does return-of-premium term insurance work?
When buying a plan, thoroughly map the investing goal. Understanding term plans with a return of premium will help you organise your finances.
Take Mr Patel, a 30-year-old seeking coverage. He has no smoking or medical history. He chooses a Rs. 50 lakh term plan with a refund of the premium. His annual premium is Rs. 12,718 for 40 years until the policy matures. The nominee will get Rs. 50 lakhs if Mr Patel passes away within the insurance term. The term plan with the return of premium will pay Mr Patel a maturity benefit if he survives the insurance period. The policy will mature for Rs. 5,08,720 (12,718 x 40).
Who can purchase Term insurance Return of Premium (TROP)?
When making critical financial commitments, such as buying term insurance with a return of premium (TROP) plan, many elements come into play. Factoring in age, income, lifestyle, and health all affect this decision and can help you choose the right policy.
The following categories may favour TROP:
Unmarried: If your parents are retired and single, you may be responsible for their finances. A TROP guarantees a large maturity benefit. Your death benefit will cover their bills. You’ll know they’ll be financially secure even without you. If you survive, you can get your TROP premiums back.
Married without children: Married people may prefer a term plan with a return of premium. TROP may help if your spouse depends exclusively on your income. You can provide financial support to protect their future. The maturity benefit given at the end of the policy is a bonus.
Families: Parents’ financial plans should include saving for marriage, college, and other life goals. If you’re the sole earner, consider your spouse and kids’ well-being. Managing current expenses and saving a lot might be costly. So, a term plan with a return of premium can help provide the advantage of a maturity benefit.
Return-of-premium term plan benefits
- Save tax annually
- Critical disease funding
- Disability support funding
- Protection until the age of 85
- Premium return
- Family security
Let’s examine a term plan with the return of premium benefits:
Death benefit: A typical insurance plan or term plan with a return of premium is for life insurance. They want financial security for their family. TROP’s death benefit helps policyholders’ families pay for emergencies.
Tax breaks: Term insurance tax benefits are available for term plans with a return of payment. Section 80C and 10 (10D) exempt term plan premiums and benefits. Term plan premiums with a return of premium are tax deductible up to Rs. 1.5 lakhs.
Why pick a return of a premium term plan?
Due to rising costs and obligations, everyone wants to save money. Financial products that help create wealth and life security are good options. Term plans with a return of premium can offer waiver of premium, accidental death benefit, disability compensation, and critical illness protection. Policyholders can feel safe investing in TROP. Buyers may need help picking between insurance plans. Selecting based on cost or policy period may be unfavourable. To be satisfied with the investment, evaluate the comprehensive benefits, including term insurance tax benefits of a term plan with return of premium.
Affordable: Return-of-premium term plans may cost extra. Yet, TROP premiums come back tax-free as maturity benefits.
Premium payment methods: Policyholders can choose a term plan with a return of a premium sum secured. You can also pick the payment method of your choice:
- One-Time Payment
- Regular Pay
- Pay Till 60
- Limited Pay
Standard T&C Apply
There are 2 tax regimes in India – new and old. Choose the correct one after consulting an expert to get the tax benefit you desire. You can opt for a regime change during the next financial year.
All savings are provided by the insurer per the IRDAI-approved insurance plan. Standard T&C apply