Term plans with return of premium (TROP)

If you have always wanted a term plan that rewarded you for surviving the term of the policy, a Term Plan with Return of Premium is the perfect life insurance policy for you.

A life insurance policy will go a long way in assuring you that your family will be taken care of in your absence and TROPs are perfect for policy holders who expect to survive the term of the policy. In order to help you decide whether TROPs are the best choice for you, let us discover what they’re all about.

What is a Term Plan Insurance with Return of Premium (TROP)?

Firstly, you need to be aware what a simple term plan policy is. Unlike some insurance policies that are valid until the time of your death, a term plan policy is taken for a specific period, usually for 10, 15, 20, 25 or 30 years. Some new age term plans today offer cover up to 75 years of age. While term plans may not provide the lifetime security that universal plans provide, they are quite lucrative because of their incredibly low premiums. This makes term plans very affordable for people who are unable to pay high premiums (usually required for life insurance products with savings and investment option) but still want the safety and security of an insurance policy.

The reason that term plans offer affordable premiums is that the policy holder doesn’t get any of his premium back if he outlives the term. However for some people, this  can be a deal-breaker, and to appease such a customers, insurers have started offering a variant of the traditional term plan – a term plan with return of premium (TROP).

Related: Term Insurance for Dummies

As the name suggests, a TROP is a variation of a term plan in which the policy holder is returned the entire premium amount that he has paid over the tenure of the policy, excluding taxes. This essentially makes insuring yourself a zero-sum game as all the money you put into the policy throughout the term will be returned to you, should you survive the term of the policy.

For example, let’s say Rahul, a 35 year old man (non-smoker) purchases a TROP plan; the policy essentials look something like this:

Annual premium paid= INR 11,000 (excluding taxes; approx. for healthy, non-smoker male)

Duration of policy = 20 years

Sum assured = INR 50,00,000

Now, in case this Rahul dies before the expiration of the policy term, the nominee will get a lump sum amount of INR 50,00,000. However, if he survives the term of the policy, the amount returned would be as follows.

Amount recovered on expiration of policy = INR 2,20,000 (11,000 x 20)

Even among TROP policies, there are certain add-ons and additional services that can be availed. Certain insurance providers offer you the option of having insurance cover for the entire term of your plan wherein you pay a premium only for a part of your term. Other providers offer a ‘mid-term benefit’ in which the policy holder is paid 40% of the premium paid till date if he survives half of the policy’s term. There are many other variations to TROP plans and customers can choose the one that are best suited to their needs and the needs of their family.

Related: A Brief Overview of Term Plan Insurance Policies

Is a TROP plan the perfect choice for you?

The answer to that question depends on the kind of person you are and what you’re looking for in your insurance policy. If you’re looking for a plan in which you don’t end up empty handed after you survive the term of your policy, and in fact, recover the entire cost of insuring yourself, a TROP plan can be your choice.

However, TROP plans understandably carry higher premiums which might put them out of the reach of certain customers. Additionally, TROP plans aren’t exactly an investment. The return you get won’t be a profit; you will only cancel out the money you’ve paid over the years to the insurer.

Ultimately, whatever your choice or your circumstance, you will be securing the future of your family in case of an unforeseen tragedy.