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Considered as one of the purest forms of policy, term insurance is widely available in the insurance market these days. Term insurance, as the name suggests, is for a defined tenure. Traditionally, term insurance plans, or let’s say, regular term insurance plans, offer benefits to the nominee of the policyholder in case of the policyholder's untimely demise during the policy tenure. In case the policyholder outlives the policy tenure, no benefits as such are offered to him/her or his/her nominee.
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Looking at the popularity of the term insurance policies and the termination of the policy after the policy tenure, many insurance companies, including the Life Insurance Corporation of India (LIC) have come up with an advanced version, that is, Term Return of Premium Insurance plan (TROP).
Let’s discuss LIC Term Insurance with Return of Premium (TROP), plans in detail:
Essentially, a LIC Term insurance with return of premium plan is similar to a regular term insurance plan. This plan works as a life cover and offers a death payout/benefit to the policy’s nominees/beneficiaries. The main component that sets it apart is the maturity payout offered under a TROP. Insurance buyers who want a term plan that offers survival benefits along with the death benefit can opt for a LIC Term Plan with Return of Premium.
Policyholders can receive benefits from a TROP by paying an additional amount of premium. One can select the requisite sum assured (SA) and policy term and pay the premium amount accordingly. The insurer will return the paid premium to the life assured when the policy matures.
Term Return of Premium Insurance Plan, apart from survival benefits, also comes with additional benefits in rider’s form.
It is important to understand the objectives of insurance before buying any kind of policy. Understanding the process of LIC Term insurance with return of premium will help you have a better knowledge of investment. Let us look at an example:
Mr. X purchased a policy of Rs.20 lakh coverage for a tenure of 10 years. He is in good health and a non-smoker, so his premium paying amount comes out to be Rs.2,000. If he dies tomorrow, his nominee will receive Rs.20 lakh as the sum assured on his term insurance. However, if Mr. X survives the complete 10 years of the policy term, then his entire premium amount paid, that is, Rs.2,000 x 10 years = Rs.20,000 will be returned to him.
In this scenario, he is left in a no-profit no-loss situation if he survives the policy term. However, in case of his unfortunate demise, his nominee will be eligible for 20 lakhs, making this TROP investment a success.
Generally, the minimum entry age to buy a term return of premium insurance plan is 21 years whereas the maximum can turn out to be 55 years. The premium payment amount depends on a lot of other factors as well apart from age such as income, lifestyle, medical condition, etc.
Mainly, individuals who fall under the following category can go for a term return of premium insurance plan:
An unmarried person does not have a spouse but can have dependent parents to look upon. In case of the demise of the policyholder, it becomes a nightmare for the dependents to move forward in life especially on a monetary level. TROP insurance plan gives you and your dependents a safe and secure future.
A married person without any offspring also requires future planning. In case the spouse is dependent on the policyholder solely, it is extremely necessary to secure his/her future so that he/she can plan his/her next level in life.
Being a parent is altogether a different world. From managing your child to managing his/her future, all big responsibilities fall on you at the same time. To avoid such pressure, the term return of a premium insurance plan is one of the best ways to support your future planning.
Here are some important features of the Term Return of Premium (TROP) plan:
Affordability: LIC Term Insurance with Return of premium may be more expensive than a regular term insurance plan. However, the premium amounts paid for TROP are returned as maturity payout and are exempted from taxation.
Multiple premium payment choices: The policyholder has the option to select the suitable sum assured amount under LIC term plan with return of premium. Moreover, you can also choose the following best-suited premium payment option:
One–time payment
Regular pay
Pay till 60
Limited Pay
Surrender value: After buying the term insurance with return of premium, if you discontinue payments of premium or surrender the plan, you will get a surrender value. This is subjected to certain conditions depending on the option of premium payment:
Rider options are available: TROP also offers additional benefits such as disability benefit, accidental death benefit, waiver of premium, and protection against critical illnesses.
*Note: To know your term insurance premium, you can easily use the term insurance calculator.
Return of the premium is a great benefit that is not offered under a Regular term insurance plan. Survival benefit or maturity benefit has become a common term which an individual looks for while buying any policy these days. The term return of premium helps an individual to stay assured of a no-profit no-loss situation in case of survival.
The primary focus while purchasing a term plan is life coverage. Under term return of premium (TROP) insurance plan, the focus is on expense coverage by the family of the policyholder during the time of crisis.
Tax benefits are available under the Term return of premium insurance plan as per the prevailing tax laws under Section 80C and 10(10D) of the Income Tax Act, 1961.
*Note: You can know more about what is term insurance and then buy the LIC term plan with return of premium.
†Policybazaar does not endorse, rate or recommend any particular insurer or insurance product offered by any insurer. This list of plans listed here comprise of insurance products offered by all the insurance partners of Policybazaar. For a complete list of insurers in India refer to the Insurance Regulatory and Development Authority of India website, www.irdai.gov.in
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