Term insurance plans with return of premium or TROP as they are popularly known, are very useful life insurance covers that help you insure your life and accumulate a fair amount of wealth. But what exactly is a TROP and what are its benefits? Are there any disadvantages to buying a TROP? Get all the answers in the article below.
What is a TROP?
A term insurance plan does not usually have a return component. You buy the plan, pay the premium and it pays a death benefit to your nominees if you die within the policy’s tenure. If you outlive the policy period, there is nothing in return and the policy comes to an end. However, in a TROP, you get the premium you paid throughout the policy period back as a maturity benefit, if you outlive the policy’s term. A TROP is more expensive than a regular term insurance plan because of this distinctive feature.
Advantages of a TROP
Listed below are some of the best benefits of term insurance with return of premium (TROP):
- Affordable life cover
Like all types of term plans, a TROP also offers an affordable life cover. You get to choose a substantial coverage amount at a low cost, which makes it simple for you to safeguard your family’s financial wellness after your demise. This is one of the most attractive features that make a TROP so popular
- Wealth creation
There is a wealth creation option with a term plan with return. Since you get a maturity benefit in the form of the returned premium, you can work towards creating a corpus. This helps you to meet your long-term goals and get the best out of your term plan, provided you survive the entire policy period. You get a platform to invest in a disinclined and regular manner, and safely get all the invested money back at a specified time.
- Tax saving
As per the regulations of Section 80C of the Indian Income Tax Act, a life insurance premium, of up to INR 1.5 lakhs a year, is tax exempted. This means the amount of money you pay towards your TRP is deducted from your taxable income and this allows you to save your hard-earned money in an easy and valid way. This is one of the best benefits you get when you invest in a TROP.
- Riders available
You can add riders to your plan and make it more flexible for yourself. Term insurance riders are add-on covers that you can add to your base policy. These increase the scope of your coverage and help to make the plan tailor-made for your requirements. It is a great way to enhance your term insurance plan.
These are some of the handiest benefits of buying term insurance with a return of premium plan. Go over the various options and choose the most suitable one for yourself.
Disadvantages of a TROP
While there are some handy benefits to a TROP, there are some disadvantages as well. They include:
- More expensive
As mentioned above, a TROP is more expensive than a level term insurance plan. This is one of the main reasons why you must think carefully before you purchase a TROP. Most people look to buy term insurance because it is cheap and offers high coverage. However, if this is the reason you wish to get term insurance, a TROP may not serve your purpose. Hence, consider the price of the plan very carefully before you finalise on your life insurance option.
- No dividends earned
While you do get to save and receive a maturity benefit at the end of the policy term, your corpus does not grow. Instead, if you invest the same amount of money in another type of life insurance, you get life coverage as well as a return on your investment. This is an important component that’s lacking in a TROP.
These are some of the most prominent disadvantages of a TROP policy. You should be aware of the cons when you think of buying a TROP, as that will help you to see the complete picture and help you make the perfect choice.
Read also: Why Holiday Rental Home Insurance Is Essential for Every Property Owner
Conclusion
As you can clearly see from the points mentioned above, there are both pros and cons of a term insurance plan with a return of premium. Keep all the factors in mind when choosing your preferred form of term insurance. It is important to keep the financial and insurance requirements in mind when choosing term insurance. Once that is done, you can get the best plan at the best rate and get the most out of your investment.
