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Life Insurance Return of Premium Plans: Know if it suits you best

9/17/23 9:29 AM


Navigating life’s financial journey is a complex path, and securing the well-being of one’s loved ones is paramount. A robust financial plan serves as the cornerstone for stability and ensuring one’s family’s future. Within this plan, term insurance plays a vital role. It not only offers pure life coverage but also constructs a financial safety net for one’s family in case of their untimely demise. Remarkably, term plans are budget-friendly, making them accessible to a broad spectrum of individuals.

Nonetheless, there’s a common reservation among Indian insurance buyers when it comes to term plans – the absence of maturity benefits. These benefits are payments policyholders receive if they survive the policy’s term. Some individuals prefer insurance policies that provide both death and maturity benefits for a more comprehensive approach to financial protection. In response to this concern, the insurance industry has introduced Term Return of Premium Plans (TROP). These plans are tailored for customers seeking maturity benefits. 

So, if one is in search of life insurance that guarantees financial security for one’s family in the event of their demise while also offering a payout if one outlives the policy term, TROP plans could be the solution one has been seeking. They offer the best of both worlds in one’s financial plan, ensuring one’s family’s future and providing them with peace of mind. It’s the ideal way to embark on one’s financial journey.


Let’s deep dive into how TROP plans work

TROP plans, or Term Return of Premium plans, are a unique type of insurance policy that combines elements of both term insurance and savings. These plans stand out due to their maturity benefits, which differentiate them from traditional term insurance policies. In a TROP plan, if the policyholder survives the policy term, they receive a refund of all the premiums paid during that term. This key differentiating feature provides a safety net, ensuring that policyholders get something back from their insurance even if they outlive the policy. This dual nature of TROP plans, providing both life cover and a savings component, makes them appealing to those who seek financial security for their loved ones and a means of saving for the future. However, one must be mindful that TROP premiums are higher than other traditional term insurance plans as the premiums paid are returned on the survival of the policyholder.


TROP plans offer several advantages beyond the maturity benefit:

Premium Break: Policyholders can benefit from a premium break option, enabling them to skip a defined number of premiums as per the policy details.

Additional Spouse Coverage: During policy claim settlement, insurers not only refund the prescribed premium amount but also provide a percentage of additional coverage to the spouse, enhancing overall family protection.

Financial Protection for Children: TROP plans not only safeguards one’s family’s future but also create a financial safety net for their children until a specified age as per the policy terms.

Exemption for non-earning individuals: In case the policyholder is unable to play the premium amount the plan nevertheless continues on a lower cover. However, this benefit is offered after the policyholder has paid their premium for a minimum stipulated number of years. 

It is also crucial to consider available rider options to tailor one’s coverage to their specific needs. Riders such as accident and permanent disability, accidental death benefit, and critical illness riders can provide additional protection.

TROP plans are suitable for individuals seeking both family financial support in their absence and a reliable means of savings with life coverage. For example, if someone purchases a 20-year TROP plan and survives the entire term, they receive a lump sum refund of all premiums paid, which can be used for various purposes like funding future goals, retirement planning, or meeting financial requirements. This combination of protection and savings makes TROP plans a valuable choice for many individuals.

While term plans are considered the foundation of financial planning due to their affordability and pure life insurance coverage, the lack of maturity benefits can be a deterrent for some insurance buyers. It is essential for individuals to thoroughly evaluate their needs and preferences while choosing an insurance plan.

Assessing each option and its advantages and disadvantages is important for making a well-informed decision. One should be mindful of basing their choice on one’s financial goals, risk appetite, and budgetary considerations. It is crucial for all to evaluate what suits one best as it provides us with the chance to make an informed decision that aligns perfectly with their financial goals, dreams and aspirations.


This column has been written by Anup Seth, Chief Distribution Officer, Edelweiss Tokio Life Insurance. Views expressed are personal.

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