Return of Premium Term Insurance Plan: Features, Benefits, Cons

There are many policy holders who look for returns when they invest money in insurance policy.

Term insurance which covers life and offers GUARANTEED death benefit to the beneficiary of the policy holder is largely opted by individuals especially tax payers in India. The top most reason is the low premium compared to other types of life insurance policies available in the market.

Term plan also has a sub-type called as return of premium (ROP) term insurance plan. This type of term plan returns the premium paid, if the insured person survives full policy term. The reason to launch such kind of policy is to make life insurance affordable to everyone.

Read about the differences between term & life insurance.

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Benefits & Features of term insurance plan with return of premium:

  • As the name indicates, the premium paid till the policy term is returned to the insured at the time of maturity. In comparison, standard plan does not offer guaranteed maturity sum assured. So basically ROP term insurance offers twin advantage – maturity + death benefit. Both these options eventually helps in securing financial future of the policy holder and the dependents. However return amount varies for each insurer. Check the return amount and associated terms and conditions before buying such policy.
  • There is an option for continuing the policy, if insured person does not pay premium after three successful year premium payment.
  • TROP offers higher sum assured.
  • Insured person also gets option to choose the term for which he/she needs protection for by paying premiums for a limited period.
  • Multiple payment options – monthly, quarterly and annually. This gives flexibility especially to self earning or business people with irregular income. Also individuals earning low income can benefit from this payout option.
  • TROP also offers policy surrendering feature.
  • Paid up value option is also offered wherein if the insured person is unable to pay premium, the policy will continue to be in-force. However in such cases coverage offered is low.

Check out 6 types of life insurance in India.

Inbuilt cover or riders:

Such return of premium term plan also offers following riders or has inbuilt cover for:

  • Accidental death or disability
  • Critical illness
  • Hospital daily cash
  • Premium paid and returns are tax free under section 80C of income tax act.

Disadvantages of TROP:

  • Higher premium
  • Reduced sum assured to the nominee in an event of death of the policy holder.
  • Short term pay option i.e. policy term is between 20 – 25 years
  • Cover offered is for a period of less than 25 year only.
  • Surrender value is low and varies depending on the payment option used. For policy holders opting for annual payouts, this amount will be higher than the ones opting for others.

Who offers such money back term plan in India?

ROP plans are offered by many life insurance companies in India. Few of them are:

  1. Max Life Insurance
  2. HDFC Life
  3. LIC’s Jeevan Mangal
  4. PNB Metlife
  5. Aegon Religare
  6. Birla Sunlife
  7. ICICI Prudential
  8. Bajaj Allianz

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