Term Insurance Plan With Return Of Premium: Life is brimming with unpredictabilities and potential risks. The future holds unknowns for both you and your dear ones. Consequently, establishing a financial safety net capable of safeguarding your family is vital if you encounter an untimely demise. A term insurance plan exemplifies such a strategy, offering substantial life coverage at an affordable premium rate over a specified duration. This plan guarantees that your family will receive the assured sum in the event of your passing during the policy’s designated term.
But what if you survive the policy term? Did you get anything back from the term plan? The answer is no, in most cases. A term plan does not provide any maturity benefit or survival benefit. You pay the premium for the life cover and nothing else. That means you lose all the money you have paid as a premium if you outlive the policy term. This is where a term plan with a return of premium (TROP) comes in handy.
What is a Term Insurance Plan With a Return Of Premium?
A TROP is a variant of a term insurance plan that offers both death benefit and maturity benefit. It works like a regular term plan, providing a life cover to your family in case of your death during the policy term. However, the main difference is that it also returns the premium you paid at the end of the policy term if you survive that period. This way, you get the best of both worlds – protection and savings.
Benefits of a Term Plan with Return of Premium:
- Maturity benefit: A TROP gives you 105% of the total premiums paid as maturity benefit if you survive the policy term. That means you get more than what you paid as a premium. You can use this amount for any purpose, such as retirement planning, children’s education, or debt repayment.
- Death benefit: A TROP provides a high life cover to your family in case of your death during the policy term. The payout option will determine how the death benefit is disbursed, whether in a monthly installment, lump sum, or a blend of both. The death benefit payout is tax-free under Section 10(10D) of the Income Tax Act.
- Tax benefit: A TROP also offers tax benefits on the premiums paid and the maturity benefit received under Section 80C and, as said before, under Section 10(10D) of the Income Tax Act, respectively. That means you can save tax while securing your family’s future.
- Flexibility: A TROP allows you to choose from various plan options, such as income benefit, return of premium with life-stage cover, or early return of premium with life-stage cover. You can also choose the policy term, premium payment mode, and riders per your needs and preferences.
- Affordability: A TROP is affordable as it charges a low premium for a high life cover. The premium depends on various factors, such as age, gender, health, lifestyle, policy term, sum assured, and plan option. You can compare different TROP plans online and choose the one that suits your budget and requirements.
How to Choose a Term Plan with Return of Premium?
- Assess Your Needs: Start by evaluating your financial responsibilities and how much coverage your family would require in case of your demise.
- Calculate Premiums: Understand that term plans with return of premium (TROP) typically have higher premiums than regular term plans. Calculate these costs to ensure they fit your budget. You may get help from the term insurance plan calculator.
- Policy Term: Choose a plan that aligns with your long-term financial goals and the period during which your dependents will need financial support.
- Sum Assured: Determine the sum assured that adequately covers your family’s financial needs. Remember that TROP policies offer a return of premiums, so you will want to ensure this amount meets your requirements.
- Rider Options: Explore optional riders, such as accidental death add-ons or critical illness riders, to enhance coverage.
- Insurance Company: Research and select a reputable insurance company with a good track record in claims settlement.
- Understand TROP Terms: Thoroughly understand the terms and conditions of the TROP policy, including the payout structure and the circumstances under which premiums are returned.
- Compare Policies: Compare TROP policies from different insurers to find the one that best suits your needs and offers competitive premiums.
- Medical Examination: Be prepared for a medical examination, as it may be required based on your age and sum assured.
- Review Periodically: After purchasing the policy, periodically review your financial situation to ensure adequate coverage.
- Read the Fine Print: Before finalizing the policy, carefully read and understand all the terms and conditions mentioned in the policy documents.
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A term plan with a return of premium is a smart way to secure your family’s future while getting something back from your investment. It offers both protection and savings under one plan. It also gives you tax benefits and flexibility to customize your plan per your needs. However, you should do your homework and compare different plans before buying one.
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