The popularity of term plans has increased over the years. One of the primary reasons for this is the introduction of new policies with better benefits. Be it selling policies online or providing 30-40 percent lower premiums, insurance companies have been trying really hard to live up to the expectations of the customers. However, consumers still wanted an insurance plan that offered them return of premiums. To cater this segment of customers, insurers launched a term plan with return of premium benefit.
What is Term Plan with Return of Premium (TROP) Plan?
TROP is a modified version of the regular term plans. It was launched for consumers to avail survival benefits upon the maturity of the policy tenure. TROPs cover all the protection benefits provided in the regular term plans. But the thing that makes these plans more attractive are the add-ons such as – conditional payouts in case of grave illness or accidental death.
How does TROP work?
The working of TROP is slightly different than that of regular term plans. For instance, consider you bought a policy of Rs 20 Lakh cover for 10 years that has a yearly premium of 2000. In case of your sudden demise, your nominee will be paid Rs. 20 Lakh. However, if you survive the term, the insurer will return the entire premium that you paid back, i.e. Rs 20,000 (2000*10).
Technically speaking, a TROP is a non-participating term insurance plan. When compared to regular term plans following features are notable:
- A term plan only offers death benefits, while the term plan with return of premium provides maturity benefits as well
- Due to the guaranteed return of premium benefit, the TROPs are slightly expensive
Why You Must 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 makes the plan ideal for investors who are looking for life cover but also want their money back in case of maturity of the policy. One can say that TROP has a large cover of term plans and the savings aspect of traditional plans like the endowment plan.
- Optional riders that are added for enhancing the protection are also available at very low additional costs in the TROP plans. You can choose a range of optional riders at the time of signing up for the policy or add them later in your policy. It is advisable to go for riders such as – physical disability, personal accident, critical illness and others.
- The TROP plans offer premium payment options like monthly, quarterly and yearly. For instance, if the policyholder is beginning his career or has responsibilities to take care of, then the single payment option is the best. In this option, the insured has to pay small amounts. On the other hand, if the policyholder can pay higher rates choosing half-yearly or yearly payment is best as the overall outgo is lesser than its other alternatives.
- TROP plan offers tax benefits under the Section(s) 80C and 10(10D) of the Income Tax Act, 1961. Under Section 80C, a policyholder can claim tax 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 deductions under Section 10(10D).
- The plan offers a ‘paid up’ option to the policyholders in case they default on the payments of the premiums. This feature makes TROP ideal for people who do not have a regular source of income but still need a policy.
Tips to Choose the Correct TROP Plan
While purchasing a TROP plan can be a brilliant investment, you must remember these things before buying one;
- Don’t look only for maturity benefits while selecting a policy. The ones offering best maturity value might not prove out to be cost-effective in the longer run.
- Always go for higher sum assured, as chances of getting discounts are more. Thus, a better proposition
- Go for the highest term available, as under these plans the policy term is not extendable later.
Is Term Plan with Return of Premium for You?
Term plan with return of premium is an insurance policy that comes out as a blessing in disguise for people looking for returns on their life insurance policy. When a plan provides you everything that was missing 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.