By Kritika Garg on November 17, 2021

A Term Plan That Refunds You Premium? Learn More!Among the several types of life insurance products available in the Indian financial landscape, a term insurance policy is the simplest and most self-intuitive option available. It’s essentially a pure life cover that solely focuses on sustaining your family’s finances in the event of your demise.

In comparison to traditional whole life policies, term plans offer higher coverage at very nominal premium rates and offer several exclusive advantages. Yet, people often hesitate to invest in these plans just because there’s no maturity benefit involved in it.

You may think that your entire capital will go in vain just in case you survive past the policy tenure, which is a viable excuse to not invest in a term plan – but not anymore. There’s something that can help you get past this fear for real.Introducing term plans with return of premium – a standard term insurance policy, but with a twist. Apart from the death benefit, these term plan variants return all your premiums paid in case you survive throughout the policy tenure.This article aims to inform you about this unique variant and share instances when it can be extremely beneficial to you. Therefore, if you are looking to get a life cover, make sure you keep reading to make your decision more informed.

What Term Plan with Return of Premium Exactly Is?

Similar to a regular term plan, a TROP also covers you against the risk of death and provides a financial corpus to your family in the event of your unfortunate demise. In addition to this, if you survive throughout the policy tenure, it also provides you with a maturity benefit.Here are some interesting things you should know about these plans:

• The maturity benefit offered in these plans is the sum of the premiums you’ve paid throughout the policy tenure
• There are no capital gains over the accumulated sum of money as no investment aspect is involved
• In case you opted for a rider with your policy, the additional amount you’ve paid for it won’t be included in the maturity proceed

Now when you know about the fundamentals of term insurance policies with the return of premium option, you should consider understanding how these plans work to gain a more transparent vision for your financial plans.How Does a Term Plan with Return of Premium Works?Let’s understand the working principle of TROP with an example – assume that you’re purchasing a policy worth Rs. 40 Lakhs for a term of 10 years with an annual premium of Rs. 4000. In the event of your death, your family will get Rs. 40,00,000 as the assured sum.On the other hand, if you survive throughout the quoted term, the insurance company is liable to return the complete premium amount you’ve paid, which in the case of this example is Rs. 40,000, provided that you’ve paid your premiums consistently throughout the tenure of ten years.Moreover, as it is a non-participating plan, you won’t receive any kind of add-ons or bonuses in form of dividends. In simple terms, the insurer does not participate in the business of the insurance company in any way.How is Term Plan with Return of Premium Beneficial for You?A term plan with the return of premium features offers various additional benefits over standard variants. Let’s take a look at some of the most promising benefits these plans have to offer:

1. ROP Benefit

A lot of people shy away from purchasing a term plan because there’s no maturity value associated with it by default. However, a term insurance policy with a return of premium benefit helps you stay assured that your principal capital is safe no matter what. This makes it a lucrative option as you not only get a fairly larger coverage at very affordable rates but also get your money back in case you survive throughout the policy tenure.

2. Death Benefit

When you purchase life insurance of any kind, your main purpose is to provide for your family’s future in your absence. You look forward to creating a financial cushion for your family in the event of any unfortunate circumstances taking place. Fortunately, term plans with a return of premium option offer a comprehensive life cover for a defined timeline, which allows you to have peace of mind that your family is financially secure even in the event of your unfortunate demise.

3. Tax Benefits

Term plans with a return of premium option also act as great tax-saving tools as they offer certain tax benefits. As per the prevailing laws of the Income Tax Act of India, you can enjoy tax savings under sections 80C and 10(10D) of the Act, which state that the premiums paid are tax-deductible with a limit of up to Rs. 1.5 Lakhs and the death benefit, as well as maturity proceeds, are exempted from taxation respectively.

4. Affordability

While term plans with return of premium option may be slightly more expensive than its standard iteration, the value you gain is more promising than the latter. Keeping the various benefits it offers in mind, a TROP certainly appears to be more affordable as compared to other life insurance variants that provide somewhat similar benefits, but at a higher price. Therefore, if you’re looking for comprehensive financial security for your family at nominal rates, these plans are your way to go.

Final Words

Term Life Insurance is one of the most important financial instruments that protect your family and loved ones from unforeseen eventualities. It is just a tool for financial protection to make sure that your family has a stable income after your death. Moreover, with the introduction of term plans with the return of premium option, you can get past the fear of losing your capital in case you survive throughout the policy tenure. Therefore, if you want to safeguard your family’s future at nominal rates, make sure you invest in these plans as soon as possible.

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