Thepopularity of term plans has increased over the years. One of the primary reasons for this is the introduction of new policieswith better benefits. Be it selling policiesonline or providing 30-40 percent lowerpremiums, insurance companies have been trying reallyhard to live up to the expectations of the customers. However, consumersstill wanted an insurance plan that offered them return of premiums. To cater this segment of customers, insurerslaunched a termplan with return of premium benefit.
What is Term Plan withReturn of Premium (TROP) Plan?
TROPis a modified version of the regular term plans. It was launched for consumers to avail survival benefits upon thematurity of the policy tenure. TROPs cover all the protection benefits provided in the regular term plans. But the thing that makes these plans moreattractive are the add-ons such as – conditional payouts in case of graveillness or accidental death.
How does TROP work?
Theworking of TROP is slightly different than that of regular term plans. Forinstance, consider you bought a policy of Rs 20 Lakh cover for 10 years that has a yearly premium of 2000. In case of yoursudden demise, your nominee will be paid Rs. 20 Lakh. However, if yousurvive the term, the insurer will return the entire premium that you paid back,i.e. Rs 20,000 (2000*10).
Technicallyspeaking, a TROP is a non-participating term insurance plan. When compared toregular term plans following features are notable:
- A term plan only offersdeath benefits, while the term plan with return of premium provides maturitybenefits as well
- Due to the guaranteed return of premium benefit, the TROPs areslightly expensive
Why YouMust Purchase TROP?
There are always customers who expect to get returns from their insurance policy. For them, TROP plan should be the choice. It provides dual benefits – Security of a term plan and assured premium returns. Some other reasons include:
- TROP plans offer a premium refund at maturity. This benefit makesthe plan ideal for investors who are looking for life cover but also want theirmoney back in case of maturity of the policy. One can say that TROP has a largecover of term plans and the savingsaspect of traditional plans like theendowment plan.
- Optional riders that are added for enhancing the protection are alsoavailable at very low additional costs inthe TROP plans. You can choose a range ofoptional riders at the time of signing up for the policy or add them later inyour policy. It is advisable to go forriders such as – physical disability, personal accident, critical illness and others.
- The TROP plans offer premiumpayment options like monthly, quarterly and yearly. For instance, if thepolicyholder is beginning his career or has responsibilities to take care of,then the single payment option is thebest. In this option, the insured has topay small amounts. On the other hand, if the policyholder can pay higher rateschoosing half-yearly or yearly payment is best as the overall outgo is lesserthan its other alternatives.
- TROP plan offers taxbenefits under the Section(s) 80C and 10(10D) of the Income Tax Act, 1961.Under Section 80C, a policyholder can claimtax deductions up to Rs. 1.5 Lakh for the amount paid as premiums. Moreover,the maturity benefits available in TROP plan are also subject to tax deductionsunder Section 10(10D).
- The plan offers a ‘paid up’option to the policyholders in case they default on the payments of thepremiums. This feature makes TROP ideal for people who do not have a regularsource of income but still need a policy.
Tipsto Choose the Correct TROP Plan
Whilepurchasing a TROP plan can be a brilliantinvestment, you must remember these things before buying one;
- Don’t look only for maturitybenefits while selecting a policy. The onesoffering best maturity value might not prove out to be cost-effective in thelonger run.
- Always go for higher sumassured, as chances of getting discounts are more. Thus, a better proposition
- Go for the highest term available, as under these plansthe policy term is not extendable later.
IsTerm Plan with Return of Premium for You?
Termplan with return of premium is an insurance policy that comes out as a blessingin disguise for people looking for returns on their life insurance policy. Whena plan provides you everything that wasmissing from the traditional term plans, then why wait to purchase it?
Hurry up and buy term plan with return of premium from leading financial institutes like Future Generali, to reap the best benefits this plan can provide.
Disclaimer: This article has been written by Anisha Arora and do not necessarily reflect the views of the Free Press Journal.