For many individuals, life insurance is a key part of long-term financial planning. Among the many types available, Term Insurance with Return of Premium (TROP) has gained attention for offering coverage and a refund of premiums if no claim is made. But is it really a smart choice? Let’s break it down in simple terms.
What is Term Insurance with Return of Premium?
Term insurance provides pure life cover for a specific term (like 10, 20, or 30 years). If the insured person dies during the policy term, the nominee receives the sum assured. However, traditional term plans do not offer any return if the policyholder survives the term.
TROP is a modified version. If you outlive the policy term, the entire premium paid (excluding taxes and rider charges) is refunded to you. It’s like getting your money back while staying protected.
Key Features of TROP
- Guaranteed return of premiums on policy maturity
- Pure term life coverage throughout the policy period
- Available for terms ranging from 10 to 40 years
- Optional riders like accidental death, critical illness, or waiver of premium
Pros of Return of Premium Term Insurance
Risk-Free Protection: You get peace of mind knowing your family is protected, plus a refund if unused.
Savings-Oriented: Unlike regular term plans, this acts like a forced savings tool.
Tax Benefits: Premiums are eligible for tax deductions under Section 80C, and returns are tax-free under Section 10(10D) in India.
Cons of Return of Premium Plans
Higher Premiums: TROP plans cost significantly more than standard term policies.
Lower Returns Compared to Investments: If you invest the cost difference in mutual funds or PPF, your corpus could be higher.
Limited Flexibility: These plans are rigid – missing payments might lead to policy lapse or reduced benefits.
Who Should Consider TROP?
- Individuals who prefer guaranteed returns over market-linked investments
- Those who may not be disciplined savers and want a built-in savings mechanism
- People with a low-risk appetite seeking simple protection plus maturity benefits
Sample Comparison
| Feature | Regular Term Insurance | TROP |
|---|---|---|
| Premium (yearly) | ₹10,000 | ₹25,000 |
| Sum Assured | ₹50 Lakhs | ₹50 Lakhs |
| Maturity Benefit | ₹0 | ₹2.5 Lakhs (premium refund) |
| Tax Benefit | Yes | Yes |
Final Thoughts
Term Insurance with Return of Premium is ideal for those who want life cover and dislike the idea of “wasting” money on premiums. While it’s more expensive, it provides value to individuals looking for guaranteed returns with zero risk. However, if you’re comfortable investing separately, a simple term plan plus mutual fund SIP might offer better value.
The decision depends on your financial goals, risk tolerance, and discipline. Analyze your needs before choosing.