When you’re thinking of buying life insurance, one question often comes up: What happens if I survive the policy term? Traditional term insurance pays out only in case of death of the insured during the policy period, which means there are no maturity benefits. But if you’re someone who wants financial protection along with the promise of getting your money back, a return of premium life insurance policy might be a better option to consider.
In this post, we will explore how it works, what the pros and cons are, and what kind of plan could be the best term policy for your needs.
What Is the Return of Premium Term Insurance?
A term insurance policy with return of premium (often called TROP) offers dual benefits. It ensures your family is protected financially in your absence, and if you survive the term, it returns all the premiums you’ve paid, excluding taxes and charges in most cases.
So, say you’ve paid ₹1,000 every month for 30 years. You’ll get back ₹3.6 lakhs at maturity if nothing happens during the policy term. You stay protected and you don’t feel like the premiums went to waste. That’s the appeal of the return of premium plans.
But how do you choose the best term policy when every insurer seems to be offering something similar? Let’s take a closer look.
Why People Prefer Return of Premium Life Insurance
For many people, life insurance is still viewed as an investment rather than a protection tool. And this mindset makes the return of premium life insurance attractive. If you’re the type of investor who wants to see returns in any form, even if you don’t end up using the cover, TROP feels safer.
It’s also ideal for people who struggle to justify paying premiums with no return unless something tragic happens. In short, it’s for peace of mind, financially and psychologically.
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Benefits of TROP
The first benefit is of course the most obvious one: You get back your premiums. It’s a comforting thought and it still works like a regular term plan if something happens to you where the nominee gets the full sum assured. So there’s no compromise on protection.
Another plus is the disciplined savings it promotes. You pay your premiums regularly, and at the end of the term, you get a good portion of your money back. That lump sum could be used to meet long-term goals like helping your child start their career, paying off a remaining loan, or simply supplementing your retirement fund.
The Disadvantages of TROP
Of course, everything comes with a flip side and TROP is no exception. The main downside is the higher-than-regular cost. Return of premium plans come with higher premiums than pure term plans. In some cases, you might pay 1.5x to 2x more for the same sum assured. That’s the price you pay for the ‘return’ benefit. The question is that could that extra amount be better invested elsewhere?
Another point to consider is liquidity. If you stop paying your premiums midway or surrender the policy early, the return benefit may not apply. So, it works best only if you stay committed for the entire duration.
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Who Should Consider a Term Plan with Returns?
If you’re in your late 20s or early 30s, have a stable income, and can afford to pay a slightly higher premium for peace of mind, a return of premium plan could make sense.
Likewise, if you’re someone who’s already invested in equity or mutual funds and wants to balance that risk with a more conservative product, this is a decent addition to your portfolio.
How to Identify the Best Term Policy with Return of Premium
There’s no one-size-fits-all here. But there are a few features you should look for.
- Some of the best term policy options in the market today offer not just the return of premium, but also built-in riders for things like critical illness, disability, or accidental death. These features can be added to enhance the base cover, often for a marginal increase in premium.
- Premium insurance providers like Axis Max Life Insurance are known for offering flexible term plans that come with various payout options like lump sum, monthly income, or a combination of both.
- Their claim settlement ratio is one of the highest in the industry, which means you can trust that the payout will actually reach your loved ones when needed.
- Another feature to check is the exit value or special surrender benefit. Some plans allow you to exit the policy at a pre-defined point and still get a portion (or all) of your premiums back. It’s a smart option for those who may want more control over their finances in the long run.
Key Benefits of Return of Premium Term Plans
Some of the most important benefits that make these plans worth your consideration are:
- Full Life Cover: Just like regular term plans, your nominee receives the full sum assured in case of your death during the policy term.
- Premium Refund on Survival: If you outlive the policy, your premiums are returned, making it feel more like a savings plan.
- Rider Options: You can enhance your policy with riders like critical illness, disability, and accidental death.
- Tax Benefits: Under Section 80C and 10(10D) of the Income Tax Act, you can claim deductions on premiums paid and the payout is tax-free.
- Fixed Premiums: Once set, your premiums don’t change throughout the term, allowing for easy budgeting.
Conclusion
Return of premium term insurance isn’t for everyone, but it fills a gap for those who want protection plus the promise of returns. If you prefer seeing tangible outcomes for your premiums and can handle slightly higher costs, this plan offers a nice balance between insurance and peace of mind.
There’s no denying that the best term policy will always depend on your personal circumstances. However, when it comes to trust, stability, and options, brands like Axis Max Life Insurance are known to offer solutions that keep you and your family covered while also respecting your need for value. With careful planning, a return of a premium life insurance policy can become more than just an expense; it can be a key part of your financial future.
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Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.
Tax benefit is subject to change as per prevalent tax laws.
Hi, I’m Dev Kirtonia, Founder & CEO of Dev Library. A website that provides all SCERT, NCERT 3 to 12, and BA, B.com, B.Sc, and Computer Science with Post Graduate Notes & Suggestions, Novel, eBooks, Biography, Quotes, Study Materials, and more.
