Term Insurance and Maturity Benefits

Term Insurance and Maturity Benefits

Term insurance is a popular insurance product among policyholders. It is a simple and uncomplicated method for securing one's financial future. While it may be sufficient for most individuals, products such as term insurance with a return of premium might provide additional benefits. Let's have a look at how it works.

What Exactly is a Term Plan with Return of Premium?

A term plan with a return of premium is essentially the same as a conventional term plan. It functions as a life insurance policy, paying out a death benefit to the policy's beneficiaries. However, the maturity benefit available on a term plan with a return of premium is the fundamental feature that distinguishes it from a simple term plan.

By paying an extra premium, policyholders might benefit from a term plan with a premium return.

You can pay the premiums according to the needed sum assured and insurance duration. When the policyholder survives the term, and the policy matures, the insurance company will refund the policyholder's premiums.

Two Types of Insurance Buyers

One who is seeking a way to save money while also having life insurance.

One who just needs life insurance to offer financial assistance to their family in their absence. However, TROP is suitable for the former type of insurance buyers.

You can select an appropriate plan for your family based on your financial needs.

How Do Term Insurance with Return of Premium Plans Work?

Before purchasing a plan, it is to your best advantage to thoroughly map out the goal of the investment.

Understanding how a term plan with a return of premium works can help you make better financial decisions.

Consider a policy with Rs.20 lakh cover for 10 years for which the yearly premium is Rs.2,000. If the insured dies, the family will be paid Rs.20,00,000 (Sum Assured). However, if the insured survives the term, the insurer will return the entire premium amount, that is, Rs.20,000 (Rs.2000x10).

Advantages of Term Insurance with Premium Refund

1. TROP Advantage

Because there is no maturity benefit, many insurance purchasers are deterred from purchasing a term plan. A term plan with a return of premium offers maturity benefit. The TROP (term insurance with a return of premium benefit) provides policyholders with peace of mind.

2. Death Coverage

When a person purchases a basic insurance policy or a term plan with a return of premium, the primary goal is to provide life insurance. They want to build a financial shield around their family to protect them from unforeseen events.

TROP's death benefit assists the policyholder's family in managing their expenditures during a catastrophe.

3. Tax Advantages

Purchasing a term plan with a return of premium entitles a person to tax savings. You can make use of the benefits in accordance with the applicable tax laws. The premium paid for the term plan and the benefits received are tax-free under Sections 80C and 10 (10D).

A tax deduction of up to Rs. 1.5 per annum lakh can be claimed on premiums paid for a term plan with a return of premium. Please note that tax benefits are as per current tax laws and subject to change.

Why Go for a Term Plan with Return of Premium Option?

Given the rising cost of living and our increasing duties in life, we are all seeking better methods to manage our money.

Additional advantages of a term plan with a return of premium option may include premium waiver, accidental death benefit, disability compensation, and protection against severe diseases Investing in TROP might provide policyholders with a sense of overall security.

It may be tough for a policy buyer to pick amongst the many insurance plans offered. Choosing based on a single deciding element, such as cost or policy period, may be detrimental. As a result, to be happy with the investment, examine the all the benefits of a term plan with a return of premium.

Features of a Term Plan with Return of Premium 

1. Affordable

A term plan with a return of premium may be slightly more expensive than a standard term plan. The premiums paid for TROP, on the other hand, are refunded as a maturity benefit and are eligible for tax deduction, depending on the current tax laws.

2. Payment Options for Premiums

As a policyholder, you can select the appropriate sum insured under a term plan with a return of premium. Furthermore, you may choose the best-suited premium payment plan from the following :

Single Payment

Instead of being spread out over a long period of time, the whole TROP premium is paid in one flat payment.

Periodic Payments

You pay TROP premiums at regular intervals during the policy term if you choose this premium payment option. You can pay them on an annual, semi-annual, quarterly, or monthly basis.

Pay Till You're 60

This option under term plan with return of premium allows you to pay off premiums until the age of 60, while the plan lasts until the age of 85 or as laid down in the policy terms.

3. Surrender Amount

If you stop paying premiums or surrender the plan after acquiring the term plan with a return of premium, you will get a surrender value. Please note that the surrender value of TROP Depends on the premium payment method.

Who Should Purchase Term Insurance with Return of Premium (TROP)?

When it comes to critical financial decisions, such as purchasing term insurance with a return of premium (TROP) plan, everyone has different goals. This is heavily influenced by a variety of personal characteristics such as your age, source of income, lifestyle choices, and medical issues. Analysing your economic status based on these important characteristics might assist you in determining the best insurance.

So, if you want to buy a term plan with a return of premium, you need to weigh the benefits against such concerns.

Is a TROP a Win-Win Situation?

While acquiring TROP may appear to be a simple task, you will need to analyse it further in order to make an educated decision. Here are a few ideas to get you started :

When acquiring Term Insurance with Return of Premium, insurers may take a step further by providing add-on covers in addition to the existing policy. Personal accident, critical sickness, and permanent disability are among the optional coverages. The extra premium you pay for the riders is not repaid at maturity.

The premium cost charged for TROP is expensive when compared to a pure term insurance policy. For example, if a 30-year-old Mr Khan buys conventional term insurance with a cover of Rs. 1 crore, he will pay about Rs.10,000 each year for the next 40 years. Mr Khan's premium will be roughly Rs.28,000 per year if he chooses the Term Insurance with Return of Premium variation with the same cover. In summary, if the person chooses the TROP plan, he must pay an additional INR 18,000.

The TROP plan contains the Paid-Up Value option, which allows you to run the insurance with reduced benefits if you do not pay a premium for three years. However, if the policyholder dies unexpectedly, the nominee would get a lower sum assured.

Disclaimer:

The article is meant to be general and informative in nature and should not be construed as solicitation material. Please read the related product brochures for exclusions, terms and conditions, warranties, etc. carefully before concluding a sale

Consult with your financial advisor before making any decisions on insurance purchase.

Tax benefits are as per the Income Tax Act, 1961, and are subject to any amendments made thereto from time to time

Suggested Plans

Bharti AXA Life Flexi Term Pro

  • A Non-linked, Individual, Non-participating Pure Risk Premium Life Insurance policy
  • The plan offers two options: Without Return of Premium and With Return of Premium
  • Under the Without Return of Premium variant, you have the option between Single Life cover or Joint Life Cover i.e., cover for your spouse under the same policy.
  • Flexibility in policy and premium payment terms

Bharti AXA Life Smart Jeevan

  • Affordable premiums
  • Offers 100% return of premiums paid till the end of Policy Term as maturity benefit.
  • Life Insurance covers to ensure that you are adequately protected.
  • Ease of purchase as no lengthy underwriting procedures are involved.
  • Tax benefits

Bharti AXA Life Grameen Jeevan Bima Yojana

  • Non-Linked Non-Participating Life Term Micro Insurance Plan
  • Flexibility to opt for two plan options: Pure Protection Plan Option, Protection with Return of Premium Option
  • Flexibility in Policy Term/Premium Payment Terms
  • No medical examination
  • Tax benefits

Frequently Asked Questions (FAQs)

What’s a term plan with return of premium?

A term plan with a return of premium is essentially the same as a conventional term plan. It functions as a life insurance policy, paying out a death benefit to the policy's beneficiaries. However, one distinctive feature of the term insurance with return of premium plan, which makes it different from standard term plan, is that it offers the benefit of the return of premium as survival benefit to the insured person in case they survive the policy tenure.

What are the payment options under TROP?

Here are the payment options available for TROP

  • Single Payment


    The whole TROP premium is paid in one lumpsum payment.
  • Periodic Payments


    You have the option to pay the premiums at regular intervals during the policy term. Periodic payment has the option to choose annual, semi-annual, quarterly, or monthly basis.
  • Pay Till You're 60


    This option under TROP enables you to pay off premiums until the age of 60, while the plan lasts until the age of 85 or as laid down in the policy term.

Are there any tax benefits of TROP?

The premiums paid for the term plan and the benefits received are eligible for deduction from taxable income under Sections 80C and 10 (10D) respectively of the Income Tax Act, 1960. However, tax laws are subject to change

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