The journey of life is like walking through a dark, dense forest where the fear of the unknown looms with every step. The path is often winding and difficult. And, your only priority, regardless of the unpredictable terrain, is protecting your family. Who will look after your family should you pass away - especially if you are their sole breadwinner? You need to make sure you have solid arrangements in place to ensure your loved ones are taken care of, no matter what. This is where term insurance comes in. It is the light that illuminates your trail and rekindles the hope that your loved ones are safe and secure.
Term insurance safeguards your family by providing them with a fixed sum of money - should anything unfortunate happen to you. However, there is one drawback. If you survive the policy term, you won't receive anything back, which may seem a little disappointing, considering all the money you’ve put in the plan.
If you feel this way, you do have an option - Term Insurance Return Of Premium Plan. Term Insurance Return of Premium Plan is a type of term insurance where the insurer provides you with a maturity benefit at the end of the policy term. This makes it an attractive alternative to traditional term insurance policies, as it provides you with the assurance of a return on investment.
What is Term Insurance Return of Premium Plan? What are its advantages? Let’s find out!
What Is A Term Insurance Return Of Premium Plan?
As discussed above, a Term Insurance Return of Premium Plan is a type of term insurance plan.
- It provides a death benefit, i.e., the cover amount of the plan to your family should you pass away during the policy term.
- And if you survive the policy period, you'll receive a maturity benefit - which is a refund of the premiums you have paid throughout the policy period.
You can choose the return of premium option only at the time of policy purchase, not later.
Let’s look at an example to understand TROPs better -
Alia, 25, buys a Term Insurance Return of Premium Plan with a cover amount of Rs. 45 lakhs. She chooses the policy duration to be 30 years. And, she needs to pay an annual premium of around Rs. 20,000 (excluding taxes) for the entire policy term of 30 years.
- If Alia passes away during the policy period,
Her nominee will receive a death benefit of Rs 45 lakhs.
- If Alia outlives the policy period,
She’ll receive the premiums she has paid as per the policy T&Cs.
What Makes It Different From Regular Term Insurance?
Term insurance plans only offer a death benefit. So, if you outlive the policy period, you don't get anything back. However, Term Insurance Return Of Premium Plans include a maturity benefit. This means it provides an additional layer of financial security as you receive some sort of returns - if you outlive the policy period.
Here's how these plans differ from each other -
Regular Term Insurance Plan
Term Insurance Return Of Premium Plan
Relatively high premiums.
Death and maturity benefits.
Does not pay out if you survive the policy duration.
If you outlive the policy period, it will return the premiums as per the terms and conditions of the policy.
What Is Refunded Under A Term Insurance Return of Premium Plan?
Here’s what you get back as the maturity benefit -
- The base plan premiums that you have paid during the course of your policy term.
- Additional underwriting premiums, i.e., extra premiums applied by the insurer based on medical reports, health habits, etc. are generally refunded. There may be exceptions to this - some products like PNB MetLife Mera Term Plan Plus do not refund additional underwriting premiums.
- Modal loading premiums, i.e., extra premiums charged by the insurer when you opt to pay premiums monthly, quarterly, or half-yearly instead of annual mode, are usually refunded.
What Is Not Refunded Under A Term Insurance Return of Premium Plan?
Here’s what is excluded from the maturity benefit -
- Rider premiums are usually not returned. However, a few exceptions may exist. For instance, Bajaj Allianz Smart Protect Goal refunds rider premiums.
- Taxes paid on premiums are not returned.
Advantages Of Term Insurance Return Of Premium
Here are 3 main reasons why Term Insurance Return Of Premium Plans are worth considering:
1️⃣ They Secure Your Family’s Financial Future
In the event you pass away while your insurance policy is active, the insurance company will pay your family a fixed amount as a death benefit. It is like a life buoy for your family in case of an unexpected tragedy, providing them with the financial resources they need to stay afloat. Your family will receive this money according to the payout option you select when you purchase the policy.
2️⃣ They Offer A Maturity Benefit
In the event that you outlive the policy period, you are entitled to receive your premiums (excluding taxes and as per policy terms and conditions) as a maturity benefit. It’s like having an extra safety net to fall back on. This money can be used to cover your and your family's needs.
3️⃣ They Offer Dual Tax Advantages
A TROP plan is eligible for tax benefits under the Income Tax Act of 1961.
- Under Section 80C, you can claim a tax deduction on premiums paid up to Rs. 150,000 per year.
- Under Section 10(10D), the payout you or your family will receive is exempt from tax.
So, Who Should Go For It?
Term insurance return of premium plan may not give you a big return on your investment, but you can rest easy knowing your money won't be lost. So, if you wish to receive something in return for your invested money at the end of the policy period while ensuring financial protection for your family, you can opt for this plan. It refunds the premiums you’ve paid over the policy duration, making it a safer option for those who don't want to take risks.
We've reached the end. A Term Insurance Return Of Premium Plan is a good option for people seeking some sort of return at the end of the policy period. However, before taking the plunge, go through all the terms and conditions of the policy - to ensure you're making the right decision.