Life Insurance With A Twist: Know More About Return Of Premium Policies

A look at the return of premium life insurance policies that combine investment with life insurance, while being different from ULIPs and endowment policies.

 Premium Life Insurance

Pure life insurance is supposed to be simple. The policyholder pays a premium and his or her family gets a death benefit in the event of the policyholder’s death. And they receive nothing if the policyholder survives the policy term. 

Many policy buyers expect a return against their premium, apart from the life insurance. This is why non-term life insurance plans are so popular. Return of premium plans is one such type of life insurance plan.

  • Most policy buyers expect a return on their life insurance premium
  • Return of premium policies returns you the premium at the end of the policy term
  • You can claim tax deductions and meet both insurance and investment goals with TROP
  • The premium amount is significantly higher than a pure life insurance policy

What Are Return Of Premium Plans?

Known as Term Return of Premium Plans (TROP), the insurance company returns the premium paid over the years to the policyholder, provided he survives the policy term. Thus, a TROP becomes an investment for the policy buyer, apart from being a life insurance.  

The returned premium includes the base policy premium, underwriting premium charged on lifestyle and habits, and modal loading premium imposed on payment frequency. Some insurers don’t return the underwriting premium. Besides premiums on riders and taxes are not part of the return package

Return of Premium Plans Benefits?

Unlike term insurance, you get your premium back in a TROP. There are other benefits of return of premium plans as well.

  • Affordability – There are other types of life insurance like whole life, endowment and ULIP that give you a return on investment. However, the premium amount in TROP is comparatively reasonable.
  • Tax saving – Premium paid on TROP is eligible for section 80C deductions of the Income Tax Act.
  • Flexible coverage – You can add riders to your TROP and enhance its coverage. The premium on add-on may, however, not be returned on term maturity.

Also Read: Death Claim: Is It Possible To Claim From More Than One Life Insurance Policy 

Should You Buy a TROP Insurance Policy?

This would largely depend on your insurance goal. If you want a significant amount of life insurance coverage for an affordable premium and zero return expectation, term insurance is suitable. However, many policy buyers expect a return against the premium paid. For them, a TROP policy is better suited as their life insurance practically becomes free. 

To Sum Up

It is worth considering that TROP plans are generally two times more expensive than a term plan. You end up paying more premiums or getting significantly lower life coverage. Therefore, it is wise to compare a TROP and term life insurance policy brochure and choose one based on your financial expectations from the policy.

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Also ReadMaturity Benefits: What You Need To Know When Buying Insurance 

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.


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