Term insurance is often considered as one of the most popular life insurance instruments. Primarily, term life insurance provides a substantial amount of money life cover in the form of the sum assured to your dependents, if anything happens to you within the policy period. Compared to other life insurance policy variants, term plans provide substantial coverage for the lowest possible premium, as evident through a term insurance calculator.
Term insurance is often considered as one of the most popular life insurance instruments. Primarily, term life insurance provides a substantial amount of money life cover in the form of the sum Assured to your dependents, if anything happens to you within the policy period. Compared to other life insurance policy variants, term plans provide substantial coverage for the lowest possible premium, as evident through a term insurance calculator.
However, it is true that pure term insurance plans do not offer any maturity benefit. It means that if you survive the policy coverage tenure, you will not receive any payouts under the term insurance plan.
To compensate for this shortcoming of traditional term plans, we have the ‘Term Insurance with Return of Premium’, also known as TROP plan. It works exactly like a pure term plan but also provides survival benefit when the policy matures. You can gauge the difference between the two using a term plan premium calculator. Furthermore, it is crucial to dig deeper to understand term insurance meaning before buying a plan.
Let us explore the similarities as well as the differences between a pure term plan and TROP to help you make an informed decision.
What is TROP?
It is a variant of pure term plan designed for policy buyers who look for a maturity benefit along with a life cover. As the name suggests, TROP offers the dual advantage of life insurance coverage and return of premium paid.
With a TROP plan, you get peace of mind as it provides financial security to your family in case something unexpected happens to you. Alongside, it offers an assured return of total premiums paid during the policy tenure.
Here are a few things you must also know about TROP:
- The premium payable for a TROP is higher than that of a pure term plan. You can check it using an online term insurance calculator
- The maturity or survival benefit that the policy nominee receives refers to the sum of all the premiums paid during the policy period
- No interest amount is included in the survival benefit receivable
- If you opt for additional riders with TROP, the amount paid for riders will be deducted while calculating the maturity benefit
There are many benefits of buying term insurance with return of premium at maturity. However, you must know well about them all before deciding. Using a term insurance calculator, you can get a fair idea of how term insurance premium varies when you opt for return of premium option.
Comparison Between Pure Term Plan and TROP
|Pure Term Plan||TROP|
|Basic Benefit||Life cover||Pure life cover along with maturity benefit at the end of the policy tenure|
|Returns||No returns||Maturity benefit which equals the sum of all premiums paid|
|Premium||Around 0.1 % of the sum assured||2-3 times higher than the premium for a pure term plan|
|Tax Advantages||Available under Section 80C and 10(10D)|
Why Does Buying a TROP Make Sense?
TROP offers a refund of all the premiums paid during the policy tenure. In case you survive the chosen policy tenure, you become eligible to receive the net premium paid towards the policy.
- Unlike a pure term plan, TROP provides assured returns, i.e. the insured individual will get his money back and thus, need not worry about the money not being returned by the insurer.
- You can also add riders to the TROP to enhance the policy coverage. To can get an estimate of the total premium payable for a TROP with riders, use a term insurance calculator.
- TROP offers tax benefits as per various Sections of the Income Tax Act. The premium paid and insurance benefit received are tax-deductible under Section 80C and Section 10 (10D), respectively.
Who Should Buy TROP?
In general, the minimum age required to buy a TROP ranges from 21 to 55 years and may vary from one insurer to the other. Keep in mind that your age is one of the most crucial factors that determine the TROP premium payable. You can use a term insurance calculator to check the variation of the policy premium based on age.
Any individual, whether single, married or married with kids, can purchase a TROP plan.
For Single Individuals
With a TROP, you can create a financial cushion for your parents, who may depend on you for various needs. If something unfortunate happens to you, they will get the life cover as defined under the policy. Else, you will get survival benefit to enjoy life with your loved ones afterwards.
For Recently Married Individuals
If your family only includes you and your spouse, you can secure the financial future of your better half with a TROP. In case you survive until the policy tenure ends, you will get the premiums paid back, which you can use for your retirement needs.
For Married Individuals with Children
Purchasing TROP at the right age will be there for your family as a financial backup, helping them to take care of the liabilities in your absence.