Term Insurance With Return Of Premium

As we all know, a basic term insurance plan only offers a payout to the beneficiaries of the policy after the death of the insured. However, did you think it is possible to avail survival benefits under your term insurance plan? Well, it is now!

Term plan with return of premium cover has been quite a popular term insurance variant. The return of premium features in term insurance, also known as Term Insurance Return of Premium (TROP), is an additional benefit offered by many insurers in India. Having purchased this cover along with your basic term insurance plan, you will be eligible to receive the premium paid towards the policy in case you outlive the plan.

How Does Term Insurance Return of Premium Work?

Insurers in India offer a feature that provides maturity benefits on your term insurance plan in case you outlive the policy. This feature is known as the ‘Return of Premium’ cover and can be bought as an additional benefit over and above the existing term insurance plan. The TROP is a variant of a term plan that offers death benefits in case of your death and returns the premiums paid if you survive the policy tenure.

Consider the following example for a better understanding of how term insurance with return of premium works.

Let us assume that you have been paying annual premiums of INR 5000 that provides coverage of INR 50 lakh for a period of 20 years. In case of your untimely death, the beneficiaries of the policy will receive the sum assured amount – INR 50 lakh, in this scenario. However, if you happen to survive the policy term, the insurer will return the premium of INR 1 lakh, which is INR 5000 paid for 20 years (5000 x 20), as the death benefit.

Know that this amount will not consist of the GST paid, underwriting extra premiums, and premiums paid towards the riders. Also, you need to buy the Return of Premium feature along with your existing term plan to avail the maturity benefits.

Reasons to Invest in Term Plan with Return of Premium

The following are the reasons why you should buy term insurance with the Return of Premium feature.

  1. Maturity Benefit

 The return of premium features offers a refund at maturity if you happen to survive the policy tenure. With this feature, all the premiums paid towards the policy are received as maturity benefit. The TROP makes a great deal for those who are looking for term insurance and are also keen on receiving their money back.

  1. Guaranteed Return of the premiums paid 

As mentioned earlier, the return of premium feature enables you to receive the money paid as premiums. The basic premium amount will be refunded if you survive until the end of the tenure. However, the amount excludes any additional premiums paid for enhanced coverage (riders, if any).

  1. Paid-up option for non-earning investors 

In case you do not earn a fixed monthly income, the TROP comes with a ‘paid-up’ option. With this option, you can default the payment of the premium as necessary. So, for those who do not have a regular source of earning can use this option. Thus, your term insurance will remain active even if you are unable to pay the premiums.

  1. Premium payment options

The TROP also offers multiple premium payment options that range between monthly and annual premium payments. This allows you to choose an option that is most favourable to your financial situation. For instance, if you have just started earning a fixed income, you can choose a single payment option as you might have other financial liabilities to take care of.

If you are wondering how much the term plan with the return of premium is going to cost you, use the term insurance calculator to determine the premium amount. That way, you can plan your finances accordingly.    

  1. Tax benefits

You can also avail term insurance tax benefits with a return of premium term plan. The premiums paid towards this policy can be claimed for tax deductions under Section 80C of the Income Tax Act. Also, the amount received as maturity benefit is tax-free under Section 10(10D) of the Income Tax Act, 1961.

Who Can Avail Term Plan with Return of Premium?

Typically, an individual can purchase a term plan with return of premium, irrespective of their age. Moreover, the policy aligns perfectly with your current life stage. Here, take a look –

  • If you are single: Financial security is a priority for today’s generation. Term insurance with return of premium encourages you to secure the financial future of your loved ones in your absence and create a financial cushioning in the long-term.
  • If you are newly married: In India, it is common for your spouse to be dependent on you for financial support and future security. In such situations, it is best to invest in term insurance plans as it offers financial protection to your dependents after your death. Moreover, if you outlive the policy tenure, the term plan with return of premium will pay the entire premium amount invested in the plan as a maturity benefit.
  • If you are married with kids: As a parent, it is your primary responsibility to secure the future of your children, mostly if anything were to happen to you. With a term insurance plan with return of premium, you not only protect your child’s financial future but also take care of any liabilities in case of emergencies.

Term Plan with Return of Premium vs Pure Term Insurance Plan

Pure Term Insurance Plan

Term Insurance with Return of Premium (TROP)

A pure term insurance plan is the simple variant of the life insurance product.

A term plan with return of premium is a variant of term insurance plan offered by insurers in India.

The policy provides a lump sum benefit to the beneficiaries of the term plan after the death of the insured.

Here, the policy pays the death benefit to the beneficiaries after the death of the insured.

Also, if the insured survives the policy tenure, the plan returns the premiums to the insured as survival benefit.

Ideally, the coverage offered is 10 times the annual premium paid by the insured.

The coverage offered on term insurance with return of premium is relatively lower than pure term insurance.

A pure term plan has affordable premiums.

A term plan with return of premium has slightly high premiums.

Tax Benefits on Term Plan with Return of Premium

Similar to the primary term insurance plan, term plan with return of premium has several tax benefits. The premiums paid towards the policy can be claimed for tax deductions under Section 80C of the old income tax regime. However, note that if the return of premium facility is an add-on cover on your basic term insurance plan, then you cannot claim the additional premium amount for tax deductions under this section.

Besides this, the death and maturity benefits received on the plan are tax-free under Section 10(10D) of the Income Tax Act, 1961.

Tips to Purchase Term Plan with Return on Premium

Following are a few tips that will make purchasing the term insurance return of premium plan simple for you.

  • Do not consider the term insurance maturity benefit when investing in the policy and selecting an insurer.
  • Most insurers offer discounts on a high sum assured amount. Thus, allowing you to save on term insurance premiums.
  • Select the longest policy tenure when buying term insurance in India as you won’t be able to extend the tenure later in the future.

To Conclude

Term insurance happens to be one of the most affordable and simple to understand life insurance products available in the market. Primarily, the policy provides financial protection to your loved ones in case of your sudden death. Also, a term plan with a return of premium option, allows you to receive the premiums paid towards the policy as maturity benefits. In all, it is a win-win scenario!

You can buy term insurance plans at Finserv MARKETS and benefit from features such as comprehensive coverage of up to Rs. 1 crore, affordable premiums, bespoke term plans to suit your needs, rider benefits, and more. You can also use our term insurance calculator to get an estimate of the premium amount and buy a plan that best suits your needs.

So, don’t wait! Get term insurance at Finserv MARKETS, right away.

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