Know Return of Premium Term Plan Benefits

The death rate in India is relatively high, and especially with the ongoing COVID-19 scenario, people must understand the importance of buying a life insurance policy. Most of the people in India take things for granted and do not have adequate life cover. One thing that they should remember is that the purpose of buying a life insurance plan is to safeguard the financial future of the family. 

Many people avoid buying life insurance as the premiums are considerably high. Out of the various life insurance plans available in the market, buying a term insurance policy is one of the best options. It is because it offers a high sum assured at a pocket-friendly premium.

Term insurance provides life coverage for a specific tenure. People are skeptical about buying a term plan, as it does not offer any maturity benefit. However, there is a provision for this as well. All you have to do is invest in a term plan with a return of premium (TROP). 

What is TROP?

TROP is a type of term plan that allows the policyholder to avail of maturity benefits if he survives the policy tenure. In such a case, the policyholder will receive the total sum of the premium that he has paid during the policy’s duration. For instance, the policyholder has a term plan of INR 1 crore for 15 years at an annual premium of INR 10,000. In such a case, if something unfortunate happens to the policyholder during these 15 years, the insurer will pay the sum assured of INR 1 crore will be handed over to the nominee of the policy. However, if the policyholder outlives the period of the policy, the insurer will return him the total premium of INR 1.5 lakh on maturity. 

Advantages of TROP

Here are a few plus points of TROP:

  • Assured returns

Various life insurance plans are market-linked and can assure returns on investment. Here, there is no guarantee of returns, as it depends on the performance of the market. Whereas in the case of TROP, you can get guaranteed returns. Although these returns are in small amounts, they can be useful to clear some of your debts, buy a new car, or you can use this sum for remodeling your bathroom or kitchen. 

  • Tax deductions 

One of the best term insurance benefits is that you can save taxes. As per Section 80C of the Income Tax Act, 1961, you can claim a deduction on the premium that you pay towards your term insurance plans in India. Here, the maximum permissible limit is INR1.5 lakh per annum. Additionally, the death benefit that your nominee will get is tax-free according to Section 10(10D) of the Act. In the case of return of premium, the lump sum received on maturity is tax-exempt under section 10(10D). 

  • Benefit of riders

With a TROP, you can make the most of your plan by choosing various riders based on your requirements. Here, you can purchase accidental death rider, critical illness rider, and disability rider, among others, and reap the benefits of comprehensive coverage at an economical premium.

  • Survival benefit 

A traditional term plan does not offer any survival or maturity benefit. Conversely, TROP offers survival benefits if you survive the tenure of the policy. This makes TROP one of the best investment products for people who do not want to lose the premium paid throughout the policy’s duration. 

A TROP offers many other term insurance benefits. It is a valuable option if you are looking for a product that offers a package of death and maturity benefits.