Term insurance often acts as a safety net for families. You pay a certain premium. If something happens to you during the policy term, your loved ones get a financial cushion. Yet, you lose your premiums for pure-term plans if you outlive the term. But that changes with term insurance with return of premium plan. You still get life cover, but if you survive the policy term, the insurer refunds everything you paid, minus taxes. It’s like a protective umbrella that also hands you back your money when the journey’s over.
At this point, you might be thinking, “Is term insurance with return of premium a good option?” It usually costs more than a term plan without a return of premium, but the benefit is that you get your premiums back when the policy matures. This is appealing to people who don’t like the idea of potentially “losing” their premiums if they stayed healthy. A return-of-premium plan makes sure your family is protected and you don’t walk away empty-handed in the end. Insurers offer different variations of these policies, often with riders like critical illness cover or accidental death benefits. Read on to see how it all works and which plans might suit you.
How Does Term Insurance with Return of Premium Work?
Let’s consider a 30-year-old who purchases the best term insurance Plan with a sum assured of Rs. 1 crore for a 40-year term. Assuming an annual premium of Rs. 18,000 per year, if the insured individual dies during the coverage period, the beneficiary will use the Rs. 1 crore. Conversely, if the insured outlives the deed period, the insurer will return the total premium collected (Rs. 18,000 multiplied by 40), adjusted for taxes and any fees. This means you don’t lose your investment if you survive.
The approach is straightforward. You get both insurance protection and a guarantee that your premiums will come back to you. Some plans let you choose how long you’ll pay the premiums, whether that’s through regular instalments, single-pay, or limited-pay. If you want an accelerated payout or a top-up if you meet certain conditions, you can often add riders, too.
Term Insurance vs. Term Insurance with Return of Premium
| Feature | Regular Term Plan | Term Plan with Return of Premium (TROP) |
| Purpose | Life cover | Life cover + premium refund at maturity |
| Premium Cost | Lower | Usually higher |
| Payout if Death Occurs During the Term | Sum assured | Sum assured |
| Refund at Maturity | None | Premiums paid refunded |
| Ideal For | People wanting pure risk cover at minimal cost | People seeking cover + guaranteed payback |
Who Benefits the Most from a Return-of-Premium Plan?
It’s most suited for those who don’t like the idea of paying for insurance they might never use. They also want to make sure that their money comes back if they don’t make a claim. Individuals with a stable job and decent disposable income often find these policies convenient. Some like it because it doubles as a structured way to save, even though it’s not an investment vehicle in the traditional sense.
Key Features and Benefits
The key features and benefits of opting for TROP include:
- Premium Refund on Survival: If you see the policy through its full term, you get the total premium back, minus taxes.
- Death Benefit: If an unfortunate event happens while the policy is active, your nominee receives the sum assured.
- Tax Benefits: Premiums usually qualify for tax deductions under Section 80C, while payouts are tax-free under Section 10(10D).
- Flexibility: Many return-of-premium plans allow regular pay, single pay, or limited pay options, so you can choose how you want to fund your coverage.
- Add-On Riders: Some insurers bundle critical illness or accidental death riders for an extra layer of financial safety.
Leading Term Plans with Return of Premium in India
| Insurance Provider | Plan Name | Entry Age | Policy Tenure Options | Sum Assured Range |
| Axis Max Life Insurance | Smart Secure Plus (ROP Variant) | 18–65 yrs | Up to 85 yrs | Rs. 25 lakh to no upper limit |
| HDFC Life | Click2Protect ROP | 18–65 yrs | Up to 85 yrs | Rs. 25 lakh to no upper limit |
| ICICI Prudential | iProtect Return of Premium | 18–60 yrs | Up to 75 yrs | Rs. 20 lakh to no upper limit |
| Tata AIA Life | Maha Raksha Supreme ROP | 18–65 yrs | Up to 85 yrs | Rs. 50 lakh to no upper limit |
| SBI Life | eShield Next with ROP Option | 18–60 yrs | Up to 85 yrs | Rs. 25 lakh to no upper limit |
The sum assured range and entry ages can vary based on underwriting policies. The plans above offer a balance of death benefit coverage and premium refunds at maturity. Insurance companies such as Axis Max Life Insurance, for instance, merge flexibility in payment methods with coverage that may continue into your senior years.
Understanding How Premium Payment Modes
An important element of term insurance with return of premium is that you have the option of deciding how you want to pay the premium:
- Regular Pay: Pay the premium annually (or monthly/quarterly) until the end of the policy.
- Limited Pay: Pay a higher premium for a shorter payment duration but get covered for a longer period of time.
- Single Pay: Pay one lump sum and the plan is in force for its entire duration.
Regular pay suits people who want uniform outflows. Limited pay can help if you want to finish all your payments while you’re still working, so you don’t worry about premiums during retirement. Single pay is usually for those who can afford a large one-time expense. Each approach has pros and cons, so pick the one that matches your finances.
Surrender Value & Additional Considerations
Some people worry about what occurs if they no longer can afford to keep the policy in force. In most TROP plans, there is a surrender value for stopping premiums after a period, usually once a positive cash value has been reached. You are not getting everything back, but it is not as bad as getting nothing back, which is often the case when you cancel a policy and surrender your premiums. The surrender value is determined by the number of premiums paid and the insurance company rules.
Also, remember that your policy might include riders, such as critical illness coverage or accidental death benefits. These riders can strengthen your plan but also increase the premium. Evaluate how each rider serves your long-term goals. For instance, if heart ailments run in your family, a critical illness rider could be a wise add-on.
Conclusion
TROP aims to solve the main reservation some people have about term plans: losing their premium if they outlive the policy. By returning all your basic premiums (minus taxes) at maturity, TROP keeps your family protected and also ensures you get your money back should you stay healthy. Though it costs more than a simple term plan, it’s an appealing mix of security and savings.
Insurers design these plans to be adaptable. You can choose how long to be insured, how often to pay, and whether to add riders for better protection. If you’ve been postponing life cover because you didn’t want to risk “wasting” premiums, TROP could be your middle ground. Just read the policy terms and conditions carefully. Also, do due diligence on the insurer you are choosing. Gain knowledge about their reputation, how they handle refunds and the timeline for receiving that money. No one wants surprises when it comes to insurance payouts.
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Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making any related decisions.
Standard T&C apply
Tax benefit is subject to change as per prevalent tax laws.
