When it comes to life insurance, many individuals struggle to choose between affordability and value. Traditional term insurance is cost-effective, but it doesn’t offer any survival benefits. On the other hand, whole life or endowment plans can be expensive. Term insurance with return of premium (TROP) bridges this gap, giving you the dual benefit of life protection and premium refund at maturity.
In this article, we’ll break down the concept, features, benefits, and comparisons to help you understand whether a return of premium plan is the right choice for you.
What is Term Insurance with Return of Premium?
Term insurance with return of premium (TROP) is a type of life insurance policy where the insurer refunds all the premiums paid by the policyholder if they survive the policy tenure.
- Pure term insurance: Only offers death benefit; no maturity value.
- TROP: Provides death benefit plus refund of premiums (excluding GST and rider charges) if you outlive the term.
This makes TROP attractive for individuals who want insurance coverage and don’t want their premium money to “go waste.”
Key Features of Term Insurance with Return of Premium
Here are the standout features of a TROP plan:
- Life cover: Provides financial security to your family in case of your untimely demise.
- Premium refund: Returns all paid premiums if you survive the policy term.
- Fixed premiums: Premiums remain constant throughout the policy term.
- Flexible policy terms: Available for 10, 20, 30 years or until a specific age.
- Tax benefits: Premiums qualify for deductions under Section 80C and payouts are tax-exempt under Section 10(10D) of the Income Tax Act (subject to rules).
- Optional riders: Add-ons like critical illness, accidental death, or disability can enhance coverage.
How Does Term Insurance with Return of Premium Work?
Let’s understand this with an example.
Suppose Rahul, aged 30, buys a TROP plan with the following details:
- Sum assured: ₹50 lakh
- Policy term: 30 years
- Annual premium: ₹20,000
Scenario 1: Rahul passes away at 45 → His nominee receives ₹50 lakh as death benefit.
Scenario 2: Rahul survives till 60 → He gets back ₹6,00,000 (₹20,000 × 30 years) as maturity benefit.
This dual advantage makes TROP a balanced option.
Benefits of Term Insurance with Return of Premium
1. Financial Security for Family
Provides lump-sum payout to nominees in case of death, ensuring family’s financial stability.
2. Return of Premium
Unlike regular term plans, you don’t “lose” your money if you survive the term.
3. Disciplined Savings
Encourages long-term financial planning, as policyholders remain invested for the tenure.
4. Tax Advantages
Premiums and payouts can help you save tax under Indian Income Tax laws.
5. Psychological Comfort
Many people hesitate to buy pure term insurance as it feels like “renting” protection. TROP removes that mental barrier by assuring a refund.
Term Insurance vs. Term Insurance with Return of Premium
| Feature | Pure Term Insurance | TROP (Return of Premium) |
|---|---|---|
| Premiums | Low (most affordable) | Higher (due to refund benefit) |
| Death Benefit | Yes | Yes |
| Maturity Benefit | No | Yes (refund of premiums) |
| Tax Benefits | Yes | Yes |
| Best For | Cost-conscious buyers | Buyers seeking protection + savings |
Pros and Cons of TROP
| Pros | Cons |
|---|---|
| Offers life cover + premium refund | Premiums are higher than pure term plans |
| Provides tax benefits | Refund is usually without interest |
| Encourages financial discipline | May not be ideal for short-term financial needs |
| Eliminates “money wasted” perception | Lower returns compared to investments like mutual funds |
Who Should Buy Term Insurance with Return of Premium?
TROP is best suited for:
- Conservative investors who dislike the idea of premiums going waste.
- First-time insurance buyers looking for balanced protection and savings.
- Salaried individuals who want tax benefits along with life cover.
- Families with dependents who need both risk protection and maturity value.
Factors to Consider Before Buying TROP
- Premium Affordability: Since premiums are higher, ensure they fit your budget.
- Policy Tenure: Longer tenure means better coverage and higher maturity refund.
- Claim Settlement Ratio: Choose insurers with high claim settlement ratios (CSR).
- Add-ons: Consider riders like accidental death, waiver of premium, or critical illness.
- Inflation Impact: Refund is without interest, so actual value may reduce over time.
Top Insurers Offering Term Insurance with Return of Premium in India
| Insurance Company | Plan Name | Unique Feature |
|---|---|---|
| LIC of India | LIC Jeevan Amar with ROP option | Strong trust factor |
| HDFC Life | Click 2 Protect Super | Customizable coverage |
| ICICI Prudential | iProtect Smart | Multiple rider options |
| SBI Life | Smart Shield with ROP | Flexible term choices |
| Max Life | Smart Secure Plus Plan | Comprehensive rider benefits |
Tax Benefits of TROP
- Section 80C: Premiums paid (up to ₹1.5 lakh annually) qualify for deduction.
- Section 10(10D): Maturity proceeds and death benefits are tax-free (subject to prevailing tax laws).
This makes TROP an attractive option for individuals planning both insurance and tax savings.
Term Insurance with Return of Premium vs. Other Plans
| Plan Type | Coverage | Maturity Value | Premium Cost |
|---|---|---|---|
| Pure Term | High | None | Lowest |
| TROP | High | Refund of premiums | Moderate |
| Endowment | Moderate | Guaranteed savings + bonus | High |
| ULIP | Life cover + investment | Market-linked returns | High |
Common Myths About TROP
- “It’s an investment plan.”
– TROP is primarily an insurance plan with a refund feature, not a high-return investment. - “Premium refund includes interest.”
– Refund is usually only the total premiums paid, without added interest. - “It’s the same as an endowment plan.”
– Unlike endowment, TROP mainly focuses on protection, not wealth accumulation.
Tips to Choose the Best Term Insurance with Return of Premium
- Compare multiple plans online before buying.
- Check the claim settlement ratio and customer reviews.
- Choose adequate coverage based on income and family’s needs.
- Opt for a long-term plan for maximum benefit.
- Disclose all health and lifestyle details honestly to avoid claim rejection.
Conclusion
Term insurance with return of premium is an ideal choice for those who want the best of both worlds—life protection and premium refund at maturity. While it is more expensive than pure term insurance, it offers peace of mind by ensuring that your money is not “lost” if you outlive the policy.
If you want affordable life coverage but dislike the idea of paying premiums without any return, TROP can be a smart solution. However, if maximizing returns is your goal, exploring investment-linked insurance or other financial products may be better.
Ultimately, the right choice depends on your financial goals, risk appetite, and long-term planning needs.