Should You Really Choose Term Insurance With Return Of Premium?
Published On Nov 11, 2021 2:00 AM By InsuranceDekho
Table of Contents
A term plan with return of premium is a non participating insurance plan. A term plan only offers death benefits but TROP offers the benefit of the return of premium as maturity benefits after the completion of the policy tenure. Because of the guaranteed feature, the premium rate of TROP plan is higher than a pure term insurance plan. It is designed for those customers who want to provide financial security to their loved ones along with the benefits of the returns.
TROP offers the combined benefits of insurance coverage and return of premium. It offers a premium refund on the maturity of the policy. In case the insured survives they are eligible to receive the total amount of premium they have invested in the plan.
Features of Term Plan with Return Of Premium Benefits
The main features of TROP are as follows:
1. Sum Assured
The sum assured in TROP plans refer to the life insurance cover that is offered to the insured person by the insurer at the time of signing up for the plan. TROP offers a lower sum assured amount as compared to pure term insurance policy, as the premium is refunded.
2. Survival Benefits or Maturity Benefits
The survival or maturity benefits offered by a TROP is what makes it different from a traditional term plan. Under a pure term plan an insured person does not receive any survival or maturity benefits. However, under a simple TROP plan, the insured gets back all the money they had invested as the premium for the plan less any taxes.
3. Death Benefit
The term plan with return of premium offers a death benefit as the total sum assured to the nominee in case the insured person dies due to any eventuality. Different insurance companies offer a sum assured amount depending on the plan or mode premium payment or the type of cover opted.
4. Surrender Value
The surrender value of a TROP generally varies depending on the payment option. As a rule, the surrender value is generally more for single premium plans where the entire premium for the policy is paid at the beginning of the policy period. Insurers will have different ways of calculating the surrender value and the people who are looking at TROP plans should make sure they know what they are getting as the amount they may receive will probably not be what they assume they will receive.
5. Paid-Up Value
This is a benefit that may be provided under a TROP. Under this, as mentioned, the plan continues if the policyholder is unable to pay the premium, though with a lower cost. Most companies require the policyholder to pay the premium for a minimum number of years before they offer this benefit.
Insurance companies offer various riders in addition to the principal cover. These generally include: personal accident or disability rider, critical illness rider and hospital cash.
Unlike traditional plans that may provide a cover that lasts for the lifetime, a term plan with the return of premium lasts only for a certain period such as 10, 15, 20, 25, or 30 years. Most of these plans have a maximum maturity age below 70 years; some insurers provide cover beyond 70 years.
Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.