Specifically designed to look into the needs and requirements of insurance seekers, a term plan with return of premium (TROP) feature is gaining momentum as it not only protects the insurers family but also gives him/her the benefit of returns.
Here we shall talk everything about return of premium term plan – meaning, features and benefits.
What is Return of Premium Plan? What is Return of Premium Term Life Insurance?
Return of premium feature of term plan is same as any other typical term insurance, however, at the end of the term if the insurance holder survives, he/she avails the survival benefit i.e. the assured premium return.
For instance, let’s assume Mr. Sharma bought a TROP for sum assured of Rs. 1 crore. His premium was Rs. 14,000 for 30 years. On Mr Sharma’s untimely death his family will receive Rs 1 crore. However, if Mr. Sharma is alive and kicking after these 30 years.
What are the Features of Term Plan with Return of Premium?
Survival Benefits: Under a pure term insurance policy, the insured doesn’t get any maturity or survival benefits. However, when it comes to term policy with return of premium plan, the insured gets all the premium that they had paid sans the taxes.
Death Benefits: In case of any eventuality of the insured person, the total sum assured is paid to the nominee.
Sum Assured: Now that the insured gets the survival benefits and the premium is refunded, the sum assured of return of premium plans is comparatively lower than the normal term insurance or life insurance plans.
Paid-up Option: If an insured due to some circumstances stops paying the premium amounts after at least three years, the policy with return of premium will still continue but with reduced benefits. In most of the cases, the premium paid by the insured person will be returned at maturity. However, if the insured person dies, the nominee will get a reduced sum assured amount.
Riders: Just like the usual life insurance policies, return of premium term life insurance plans too have all the riders – critical illness, accidental death, disability riders. However, the additional premiums paid on the riders is not refundable and is not inculked in the amount offered in the survival benefits.
What are the Benefits of Return of Premium in Term Plans?
Ideal for Investors – Unlike normal term plans where neither the policy holder nor the nominee gets the money if the policyholder survives the term, term plan with return of premium gives the insured person his/her money back – making it a suitable choice for investors who normally do not invest in life insurance plans thinking what if they survive the period.
Tax Benefits: Under the prevailing laws, the premium paid, and the amounts withdrawn are completely tax-free under section 80C and 10 (10 D) of IT Act 1961.
Assurance – Apart from all the benefits of a term life insurance plan, the policy holder gets the assurance that his money will be returned if he/she survives the policy period.
Who Can Avail Return of Premium Term Plans?
Anybody within the age span of 21 to 55 years, whether they are single, married with children or married without any child can avail the term plan with return of premium feature. You can avail the plan for 10, 15, 20, 25 or maximum for 30 years.
Lastly, every term policy is unique and has different features to offer. So, it is important that before you purchase them based on your requirements and capacity to pay the premium amount, you also assess the offer carefully.