Term protection Return of Premium (TROP) is a term insurance plan variation in which the full premium paid is returned to the policyholder at the conclusion of the policy period. If the policyholder survives the whole insurance term and all plan premiums have been properly paid, they will be reimbursed for all premiums paid (less GST).
The same as a term plan, TROP (Term Plan with Return of Premium) offers a life insurance policy for the life guaranteed and their dependents. The maturity payout provided by TROP is the primary distinction between the Term return of premium and a typical term insurance plan, though.
If the policyholder survives the entire duration of the policy, they will be eligible for a refund of the premium amounts under a term plan with a return of premium option. In the event of the policyholder’s passing, TROP also provides death benefits to their designated beneficiary. This indicates that a single-term term insurance plan with a return of premium offers two benefits.
What are the advantages of a term plan with a premium refund?
- Return of Premium Benefit – When a term insurance policy with a return of premium reaches its policy maturity, the premium is refunded. If the guaranteed lives out the whole policy term, they are eligible to receive the full amount of premiums paid into the plan at the end of the term of the policy. Average premiums can now be calculated using a term insurance calculator.
- Death Benefits – In the event that the life assured passes away owing to any circumstance, the term plan with return of premium offers the nominee death benefit in the form of the complete sum assured.
- Tax advantages – Individuals who purchase term insurance with a return of premium are qualified for the tax benefit. According to the current Income Tax Act of 1961 rules, you are eligible for tax benefits. According to sections 80C and 10(10D), both the premium payment for the term insurance plan and the benefit distribution are tax-free.
The tax benefits mentioned in the article may not apply if you opt for the new tax regime since many tax exemptions and deductions have been scrapped within the new regime.
Who is eligible to purchase a term plan with a return of premium?
All people, whether they are single, married, or married with children, can obtain a term plan with a return of premium.
The following people might benefit from TROP:
- If you are unmarried, you may be responsible for helping to support your parents financially, particularly if they are retired.
- If you’re married but don’t have kids, you might want to think about a term plan with a return of premium. Term return of premium (TROP) can be the good option to consider if your partner depends completely on your source of income. A bonus will be added to the maturity payout offered at the end of the policy period. You can use a term insurance calculator to calculate the average costs involved.
- If you are married and have kids, it is everyone’s primary duty to safeguard their children’s future. The TROP makes sure that your loved ones and children are financially secure in the event of any future calamities.
Pure Term Insurance vs Term Plan with Return of Premium
Pure term insurance plans and term plans with return of premium, or TROP, are the two main types of term plans. People occasionally believe that investing in any financial items would provide rewards. However, not all term plans are like that. Let’s get into more detail about the distinction between a term plan and a TROP:
| Pure Term Insurance Plan | Term Plan with Return of Premium (TROP) |
| Also called a pure protection plan, it is the simplest form of life insurance product. | Term insurance return of premium is a type of term insurance plan |
| Here, the insurance coverage is offered only as a death benefit. | Term plan with return of premium offers insurance coverage as a death benefit and additionally with the benefit of the return of premium in case the policyholder survives the entire policy term. |
| In a pure-term insurance plan, the sum assured that is offered to the policyholder is 10 times the rate of the annual premium paid. | In comparison, a term plan with a return of premium offers a comparatively lower sum assured amount to the policyholder. |
| The cost of the premium of a traditional term insurance plan is very affordable. | The cost of premium charged by term return of premium is considerably higher. |
| The benefit of tax exemption under section 80C of the Income Tax Act. | Term plan with return of premium also offers the benefit of tax exemption under section 80C of the Income Tax Act. |
| A term plan is ideal for an individual who wants to provide financial protection to their family. | Term insurance return of premium is ideal for individuals who don’t mind gaining some returns and also benefit from insurance coverage. |
Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.
Source: https://www.policybazaar.com/life-insurance/term-insurance-return-of-premium/
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