Insuremile
IRDAI/I NTAII/BA/51/2018
CIN: U72900KA2018PTC110119

A Term Plan with Return of Premium (TROP) offers policyholders a unique blend of life insurance protection and savings. Unlike traditional term plans, which only provide life cover without any maturity benefits, TROP returns the total premiums paid at the end of the policy term if no claims are made. This guide will explore the key features of TROP, premium payment options, and the benefits of choosing such a policy over traditional term plans.

Term Plan with Return of Premium


1. Affordability with Tax Benefits

While a term plan with a return of premium is slightly more expensive than a regular term plan, the added benefit of getting your premiums back makes it a valuable choice for individuals looking for both protection and savings. Premiums paid under a TROP policy are refunded to the policyholder as a maturity benefit if they survive the policy term. Additionally, these premiums are exempt from taxation under Section 80C, and the maturity payout is tax-free under Section 10(10D) of the Income Tax Act.

2. Flexible Premium Payment Options

TROP offers several premium payment options, allowing policyholders to choose a method that suits their financial needs and preferences. You can select the appropriate sum assured and pick a payment option that aligns with your income and budget. The available options include:

a. One-Time Payment (Single Premium)

Under the Single Premium option, you pay the entire premium upfront in a lump sum at the start of the policy. This option is ideal for those who prefer to avoid recurring premium payments and want to complete the financial commitment in one go.

b. Regular Pay

With the Regular Pay option, you can pay your premiums at regular intervals throughout the policy term. This could be on an annual, semi-annual, quarterly, or monthly basis, depending on what works best for you. Regular Pay spreads the cost over the policy’s duration, making it manageable for policyholders who may not have large sums available upfront.

c. Pay Till 60

The Pay Till 60 option is an innovative feature that allows you to finish paying premiums by the time you reach 60 years of age, while still being covered by the policy up to 85 years of age. This option is particularly beneficial for those who wish to clear their premium obligations before retirement, ensuring continuous coverage during the later years of life.

d. Limited Pay

Under the Limited Pay option, you can pay the premium for a fixed number of years, after which your payment obligations end, but your life cover continues for the full policy term. This option is flexible for those who want to reduce the premium-paying term while retaining insurance coverage. It’s essential to thoroughly read the sales brochure before opting for this payment option to understand the terms clearly.


3. Surrender Value: Flexibility Even When You Discontinue

If for any reason you choose to surrender your TROP policy or discontinue premium payments, the policy offers a Surrender Value, ensuring that you still receive some monetary benefits. The Surrender Value depends on the type of premium payment option chosen and the duration of premium payments made.

a. Single Premium

For TROP policies with the Single Premium payment option, the surrender value becomes applicable immediately after the one-time premium payment. This provides some flexibility to policyholders who may need to terminate the policy earlier than planned.

b. Limited Pay and Regular Pay

For policies with Limited Pay and Regular Pay options, the surrender value becomes applicable after you have paid premiums for at least two full years. This means that even if you choose to discontinue the policy after this period, you will still receive some financial benefit.


Guaranteed vs. Special Surrender Value

The surrender value is the higher of the Guaranteed Surrender Value (GSV) or the Special Surrender Value (SSV). The Guaranteed Surrender Value is a pre-determined percentage of the total premiums paid, whereas the Special Surrender Value is calculated based on the insurance company’s specific terms and market conditions.

Why Choose a Term Plan with Return of Premium?

A Term Plan with Return of Premium offers multiple benefits, making it an attractive option for individuals looking for a combination of life cover and savings. Here are some reasons why TROP could be a smart choice:

  1. Financial Security for Your Family: In the unfortunate event of your death during the policy term, your family will receive the sum assured, ensuring their financial stability.
  2. Return of Premium: If you survive the policy term, you get back the total premiums paid, turning your insurance plan into a form of savings.
  3. Tax Savings: You can avail of tax benefits on the premiums paid under Section 80C, and the maturity proceeds are exempt from tax under Section 10(10D).
  4. Flexible Payment Options: Whether you prefer paying a lump sum at the beginning or making periodic payments over time, TROP allows you to select the payment option that best suits your financial situation.
  5. Surrender Value: If you decide to surrender the policy, you will still receive a payout in the form of a surrender value, depending on the premium payment option and the amount paid.

TROP vs. Traditional Term Plan: Which Should You Choose?

When comparing a Term Plan with Return of Premium (TROP) with a traditional term plan, the key difference lies in the return of premiums feature. Here’s how they differ:

Conclusion

A Term Plan with Return of Premium is an ideal choice for individuals who want life cover combined with a return on their investment. While the premiums are slightly higher than traditional term plans, the money-back guarantee, tax benefits, and surrender value make it a secure and comprehensive option for policyholders. When choosing between TROP and other life insurance plans, evaluate your financial goals, premium payment preferences, and long-term needs to make an informed decision.

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