Term insurance is often regarded as a foundational element in any sound financial plan. It offers financial protection against life’s misfortunes and offers peace of mind. In fact, a recent study has proven term insurance a popular tool to ensure that your loved ones are financially secure. It is projected that India will be the sixth-largest insurance market globally by 2032. However, a common concern among many policyholders is that traditional term insurance offers no maturity benefits if the insured survives the policy term.
Therefore, to address this, insurers have introduced term insurance with return of premium (TROP) plans. These plans combine the benefits of term insurance with the assurance of receiving your premiums back at the end of the policy term. Let’s understand more about this appealing option for those seeking both protection and savings.
What is Term Insurance with Return of Premium?
Term insurance with a return of premium is a type of life insurance policy that provides a death benefit to the beneficiaries if the insured passes away during the policy term. However, unlike traditional term plans, the policyholder’s survival of the term is assured with a return of the premiums paid over the course of the policy. This feature makes TROP plans a hybrid product, blending the protection of a term plan with a savings element.
Term Insurance with Return of Premium Benefits
A simple term plan has several benefits, and when combined with the features of TROP, it becomes even better. Here are the two primary benefits of having a term insurance with a return of premium:
Financial Security with a Refund Guarantee
One of the primary advantages of having term insurance with a return of premium is the dual benefit it offers. In case of the policyholder’s unfortunate demise during the term, the beneficiaries receive a lump sum amount, ensuring their financial security. If the policyholder outlives the policy term, the premiums paid are returned, offering a refund guarantee that traditional term plans do not provide.
Tax Benefits
Another significant advantage of term insurance with return of premium plans is the tax benefits they offer. Policyholders can claim tax deductions on the premiums paid under the Income Tax Act’s Section 80C. Additionally, the death benefit or the returned premiums, under Section 10(10D), are also exempt from taxes. Thereby making TROP plans a tax-efficient option.
Comparing Term Insurance with Return of Premium to Traditional Term Insurance
When considering whether to opt for term insurance with a return of premium or a traditional term plan, it’s essential to weigh the pros and cons of each. Here’s an overview of the comparison between the plans:
- Cost Considerations
One of the primary differences between TROP plans and traditional term insurance is the cost. TROP plans tend to have higher premiums compared to regular term insurance. This is because of the added feature of returning the premiums at the end of the policy term. However, for those who value the peace of mind of getting their money back, this additional cost may be worth it.
- Maturity Benefits
In a traditional term insurance plan, there is no maturity benefit. The policy simply expires at the end of the term if the policy’s term is completed. In contrast, having term insurance with a return on premium lays the foundation for a return on your investment. This makes it an appealing option for those who prefer not to leave their money on the table.
- Flexibility and Investment Options
Traditional term plans are straightforward and focus solely on providing life cover. However, term insurance with a return of premium, while offering life cover, provides a return on investment in the form of premium returns. This makes them a more flexible option, as they cater to both protection and savings goals.
Who Should Consider Term Insurance with Return of Premium?
While term insurance with a return of premium offers several benefits, it acts as an ideal choice for some specific insurers. Here’s who might find TROP plans particularly beneficial:
Individuals Seeking Both Protection and Savings: If you’re looking for a policy that provides life cover along with a refund of premiums, TROP plans can be a good fit. They combine the security of term insurance with the advantage of getting your money back.
Tax-Savvy Investors: For individuals looking to optimise their tax savings while ensuring financial protection, TROP plans offer a tax-efficient solution. It enables you to deductions on premiums paid and tax exemptions on the maturity benefit.
Is TROPs a Smart Choice for the Future?
In today’s uncertain world, financial security and peace of mind are paramount. Term insurance with return of premium offers a unique blend of protection and savings, ensuring that you and your loved ones are covered in any eventuality. Whether you’re looking to safeguard your family’s future or simply want the reassurance of getting your money back, TROP plans provide a versatile and reliable solution.
For those seeking a comprehensive plan combining term insurance with a guaranteed return on investment, Tata AIA’s TROP is an excellent choice. With a strong reputation, a high claim settlement ratio, and a range of flexible options, Tata AIA’s TROP plans are designed to meet the diverse needs of today’s investors.
Consider visiting their official website to explore how their TROP plans can fit into your financial planning strategy today!
