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Why You Should Invest in Return of Premium Term Insurance?

Published On Sep 18, 2021 4:00 PM By InsuranceDekho

Return of premium term insurance is a term insurance policy type. Also referred to as Term Insurance Return of Premium (TROP), the return of premium term insurance comes encapsulated with all the benefits of a simple term plan. What makes the insurance unique is that one can get income replacement and a premium refund at maturity. In simple words, ROP is a term policy that provides the policyholder with death benefits. What’s more, is that the policy returns the premium paid in case the policyholder survives the policy term. 

Let us understand the return of premium term insurance with an example. Suppose there is a policy with a yearly premium of Rs. 5,000. The policy has a cover of Rs. 50 Lakhs for a policy tenure of 20 years. Now, in the case of the unfortunate death of the life assured, the sum assured or Rs. 50 Lakh will be paid to the family members. On the other hand, if the life assured survives the entire policy term, the insurance company will return the premium or Rs. 1 Lakh (yearly premium x policy term). Note that some plans also offer extra bonuses upon plan maturity. However, this would totally depend on the plan as well as the insurance company.

You should also read: Do I Need a Term Insurance Plan If I Don't Have Dependents?

Key Reasons to Invest in Return of Premium Term Insurance 

The prime reasons to buy return of premium term insurance policy include: 

  • Refund at Maturity: In case the policyholder survives the policy term, the policy provides them with a premium refund at maturity. One of the key advantages of the same is that the policyholder does not lose the premium paid over the years. TROP is one of the best options for policy buyers who wish to invest in term insurance covers while receiving money back. The TROP, in its own way, comes across as the best deal for a policy buyer as it combines the large cover of term plans along with the saving feature of traditional plans.
  • Guaranteed Returns on Premiums: With an ROP plan, the policyholders are free from the concerns of not getting their money back. It is because of the fact that the policy assures them the same. The ROP policy provides guaranteed returns on the total amount of the paid premium. This is exclusive of additional premium(s) for expanding the coverage with riders. 
  • Paid-up Option for Non-earning Individuals: ROP comes with a ‘paid up’ option for people who do not have a fixed income source. This is one of the key features that help policyholders at times when they default the premium payment.
  • Premium Payment Options: Return of Premium plans to provide the policyholders with a vast choice of premium payment, like monthly, yearly, and more. This feature helps the policyholder choose the payment option that is ideal for them. 
  • Get Tax Benefits: ROP comes with the advantage of tax benefits as per the current tax laws. The policy premium paid as well as the amount drawn are free from tax according to Section 80C and 10(10D) of the Income Tax Act, 1961. Policyholders are free to optimize the premium amount for TROP so that they can lessen their tax liabilities to a certain extent.

That said, make sure you consider investing in the return of premium term insurance. While your needs may get fulfilled with a term insurance plan, an ROP or TROP term insurance plan will make sure you get your money back as well.

Must Read: Why is An Accidental Death Benefit Rider A Must For You?

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. 

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