The Long Read
Everything you *need to know* is right above this. Scroll down, only if you'd still like to read more (honestly, why?)
In a pure term plan, you don’t get any returns if you outlive the policy. However, a term plan with return of premium (TROP) gives you your paid premiums back if you outlive the policy duration.
If you are someone who feels the need to get their paid premiums back, you can opt for a TROP.
A term plan with return of premium works this way:
You pay a fixed amount of money called premium for a fixed period of time called premium payment term
You get covered for a fixed period of time called policy period
If you pass away during the policy period, your loved ones get the life cover as a payout
If you outlive your policy period, you get your paid premiums back
You can buy a term plan with return of premium if:
You are between the ages of 18-65 years (may vary from insurer to insurer)
You are an Indian citizen-resident/Non-Resident Indian (NRI)/Person of Indian Origin (PIO)
You have an active income and can show the proof for the same
Here are the benefits of return of premium term life insurance:
It provides financial protection to your family
You can choose how long you want to get covered
You can choose how you want to pay your premiums
You get your premiums back if you outlive the policy.
Choose a return of premium term plan if you are of the opinion that you should get something back if you outlive your policy period. In this plan, you’ll get your paid premiums back. However, do understand that these plans are typically more expensive than pure term plans. Further, due to inflation, you’ll not get the exact value of your premiums.
When you buy term insurance, your family receives your policy money only if you pass away during the policy duration.
You don’t get any maturity benefit, which means if you outlive the policy, you get nothing!
Unless of course, you opt for an add-on benefit called a Return of Premium rider when buying your term policy.
It enables you to receive a “Survival Benefit” i.e. it refunds only the entire premium paid during the policy duration.
Let's understand with an example:
Say, you’ve bought a term policy with a life cover of ₹ 1 crore and a policy term of 10 years at an annual premium of ₹ 10,000. You can compare your term plan premium.
With this rider, you’ll get only ₹ 1 lakh back if you outlive the policy duration
If you are of the firm mindset that you want to ‘get something back’ if you have paid for it, you should opt for this rider.
However, do understand that this rider only refunds the premiums without any returns.
It is also very expensive and will in turn increase your premium.
It makes more sense to invest this extra money in a mutual fund or fixed deposit because you will get better returns.
Last but not least, even if you opt for this rider, thanks to inflation, the money you will get back will have much less value at the end of your policy term, which means you’re not really getting your “full money back”.
The Return of Premium rider is amongst the most expensive riders available.
The actual cost may vary from insurer to insurer so consult your life insurance company or an insurance agent/advisor to know your options.
Simple, exactly how you buy other riders i.e. at the time of applying for a term insurance plan.
There is no separate eligibility criteria for this rider.
If you meet the term insurance eligibility criteria, you are also eligible to get this rider.
Yes! You can enjoy tax deduction up to ₹ 1.5 lakh on the premium of a term plan with TROP rider under Section 80C of the Income Tax Act 1961.
*Tax benefits & exemptions are subject to conditions of the Income Tax Act, 1961 and its provisions and tax Laws are subject to change from time to time. You are requested to seek tax advice from Chartered Accountant or personal tax advisor with respect to personal tax liabilities under the Income-Tax law
© 2021 KlarifyLife. All rights reserved.
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