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How TROPs can ensure your family’s independence


At different stages of life, people often have different priorities. Duringthe younger years, one might focus on establishing stability and maximizing income. In the later years, one has to consider the needs of their dependents. For a smooth and steady future, financial planning will be of the utmost priority. Along with findingsuitable investment avenues, one should not neglect the importance of an insurance plan. A good insurance policy can help financially support your dependents to live a normal life in your absence. This is why selecting the right insurer and the right plan becomes a crucial choice.

Whole life plans, endowment plans, and term insurance plans are some of thecommonly sold plan types. Amongst working professionals, term insurance is one of the popular products.

Term Policy

Itis a simple and affordable form of life insurance plan. It doesn’t contain any investment component and focuses on guaranteeing a pre-decided pay-outin case the insured does not survive. It generally does not come with any survival benefits. At the start of this policy, the premiums are at their lowest and gradually increase with the age of the insured during the purchase. Upon survival/maturity, the premiums cannot be recovered.

Term insurance with a return of premium

There are different types of term plans people can opt for. Policyholders looking for a term policy offering both survival benefit and death benefit can opt for a term insurance plan with a return of premium (TROP). In this plan, all the premiums paid over the policy tenure are received back upon maturity.

A regular term insurance plan pays the sum assured of the insured passes away during the policy term. There are no other payments besides the sum assured. In TROP, the nominees are paid the sum assured in case theinsured dies,but upon survival, all the premiums paid over the policy tenure will be returned. As a result, the insured does not have to lose out on any premiums paid over the policy duration.

Suitability for a Term Insurance with a return of premium plan

Term Insurance with return of premium are nothing but an extension of the basic term plan with the assurance to return the premium to the policyholder at maturity upon survival. TROP can suit persons with dependents to be taken care of or those looking to receive their premiums back at the end of the policy term.The benefits available under TROP are plenty. Firstly, the premiums are economical, thus offering low monetary risk to the insured. Secondly, TROPs have add-on benefits that can be opted for more comprehensive coverage. For example, optional riders can be taken to cover accidental disability, accidental death, or critical illnesses. TROP with suitable riders can provide comprehensive coverage at affordable rates. The premiums are fixed throughout the policy tenure. This gives the policyholder the time to plan their expenses accordingly. There are no additional premiums in the later stages of the policy. One can use a term plan premium calculator to estimate the value of the premium pay-outs they would have to make.There are also tax benefits that can be availed on the premiums paid.

While considering the above benefits of TROP, do keep in mind some important points:

  • A TROP plan may cost more than a vanilla term insurance policy, due to the return of the premium option paid to the insured at maturity.
  • The policyholder should survive till the end of the policy tenure for the premiums to be returned.
  • In the case of the insured passing away during the policy tenure, only the death benefits will be paid to the nominee/s.
  • The policy should be in force for its entire tenure. Any lapse in premiums shall lead to the termination of the policy,with no premiums returned on maturity.

There are various types of term plans in the market, along with many other types of life insurance policies. Many life insurance plans also offer returns, with some being market-linked. The lump-sum amount received at maturity can be used to buy a car or to renovate your house. However, market-linked returns are not always a guaranteed benefit. When it comes to financial planning, having a clear picture helps. TROP can be an ideal product for people who want to avoid losing out on the money paid for premiums and who want a decent death benefit sum as security.

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