Best Term Insurance Plans with Return of Premium: A Smart Choice for Future Security
Life is unpredictable, and it is necessary to arrange finances for yourself and your loved ones. One of the smartest moves to make this is investing in term life insurance. While conventional term policies provide financial security in case of a disastrous event, some people do not want to opt for them because they do not yield any returns if the policyholder survives the term. This is where the best return of premium term insurance (TROP) comes into the picture. It provides not only financial protection, but also the benefit of getting back all the premiums paid throughout the policy term.
In this blog, we will explore why TROP is a smart choice, how it works, its benefits, and the best term insurance plans that offer a return of premium. Let's begin!
Understanding Term Life Insurance with Return of Premium
The term life insurance is a basic type of life insurance that provides financial security for a fixed duration. If the policyholder passes away within the policy period, the nominee receives a death benefit. But in the traditional term plan, if the policyholder outlives the term, he or she does not receive a maturity benefit.
With the advent of premium term insurance, the policyholders get to enjoy the cover of life cover along with a promise that if they outlive the policy term, all the premiums received will be given back to them. This aspect makes TROP a popular choice among individuals looking for financial protection as well as guaranteed returns.
How Does a Return of Premium (TROP) Plan Work?
TROP plans operate just like the normal term life insurance but with rider benefit at maturity. Let us see how:
- The policyholder pays the premium for the chosen tenure (let us say 10, 20, or 30 years).
- If the policyholder dies during the term of the policy, his/her nominees receive the sum assured.
- If the policyholder survives the term, he or she receives the entire premiums paid (excluding tax and rider cost).
- Some insurers offer additional rider benefits for added coverage.
Why to Choose a TROP Plan?
- Guaranteed Return of Premium: Unlike regular term plans, where premiums are non-refundable, a TROP plan ensures you get back every penny you've paid as premiums if you survive the policy term.
- Family Financial Security: In case something ill befalls you, your family members will receive the sum guaranteed, making them financially stable even in your absence.
- Tax Benefit: TROP plans come under the tax relief provision of Section 80C and Section 10(10D) of the Income Tax Act, thus being a tax-efficient investment.
- Low Premiums Compared to Endowment Policies: While TROP premiums are slightly greater than standard term plans, they are less expensive than endowment policies, which incorporate insurance and investment.
- Psychological Comfort: People do not like to buy standard term insurance since they perceive their money to be "lost" in case they survive the term. A TROP policy allays this fear.
Top Term Insurance Plans with Return of Premium
Some of the best term insurance with return of premium in India are:
HDFC Life Click 2 Protect Super
- End-of-term returns of premiums
- Choice of coverage with different options
- Riders for additional security
Max Life Premium Return Protection Plan
- Offers life cover as well as return of premium benefits
- Choice of different sum assured values
- Tax benefit under 80C
ICICI Prudential iProtect Return of Premium
- High sum assured at low premiums
- Premium refund on maturity
- Additional cover against critical illness
Bajaj Allianz Smart Protect Goal
- Term insurance with the option of return of premium
- Choice of various riders to suit the need
- Flexible payment modes for premium
TATA AIA Life Insurance Sampoorna Raksha+
- 100% refund of premium on maturity to policyholder
- Liberty to choose coverage and pay-out options
- Health riders offered as an additional coverage
Factors to Keep in Mind Before Buying a TROP Plan
- Policy Term and Premiums: Compare different plans prior to purchasing a TROP plan to strike a balance between premium and term of coverage.
- Claim Settlement Ratio: Choose an insurer with a high claim settlement ratio (CSR) so that your family does not have any trouble while settling claims.
- Additional Riders: Enhance your policy by adding riders such as critical illness cover, accidental death benefit, or waiver of premium rider.
- Exclusions and Conditions: Read policy documents meticulously to know about exclusions, i.e., pre-existing illness and suicide conditions.
- Inflation Factor: Ensure the sum assured is sufficient to meet your family's needs in the future considering inflation.
Who Should Purchase a TROP Plan?
A TROP plan will suit:
- Individuals who want financial protection with a guaranteed return
- Risk-averse individuals who want to receive their money back at the end of the term
- Salaried individuals looking for tax-saving options
- Family individuals who desire long-term financial security
Frequently Asked Questions (FAQs)
Are TROP plans better than conventional term insurance?
TROP plans have the additional benefit of premium return, so they are ideal for people who want to receive something back if they survive the policy period. But standard term plans are more economical if you are searching for plain life cover only.
What happens if I stop paying premiums in the middle of the term?
If you fail to pay premiums, your policy lapses, and you lose the benefits. A few companies allow a grace period to reinstate the policy.
Does TROP offer any tax benefit?
Yes, the premiums received are deductible under Section 80C, and the maturity value is tax-exempt under Section 10(10D).
Do I get the option to include riders in the TROP plan?
Yes, most insurers offer additional riders such as critical illness cover, accidental death cover, and waiver of premium for additional protection.
Is the return amount taxable?
No, under Section 10(10D), the return of premium amount received is tax-free if certain conditions are satisfied. Term insurance policy is what you need for securing your family's future. If you need something that has both life coverage and guaranteed returns, then best return of premium term insurance is a great option. It not only gives security to your near and dear ones but also refunds your amount of your investment back to you in case you survive the policy period.
Before purchasing a TROP plan, compare different policies, understand the terms, and choose the one that suits your investment purpose. With the right policy, you can rest assured, knowing that your investment is secure and worth it for the future!
