Term insurance plans for your family are pure protection insurance plans available in the markets. The term insurance plan will provide the beneficiaries with a sum assured if the policyholder passes away. But if the policyholder survives the policy term, no survival benefit is provided to the policyholder or the family. This is where a term plan with return of premium comes handy. The TROP (term plan with return of premium) functions just like a term plan. The only difference is that the policyholder receives the survival benefits from the term plan as return of the total premium paid if they outlive the term.
For example, you buy a term plan with a maturity benefit with a sum assured of ₹30 lakhs, a tenure of 10 years and a yearly premium of ₹3000. If you, the policyholder, pass away because of an unfortunate event during the policy term, then your beneficiaries get the sum assured from the policy. However, if you survive the policy term, the insurer will provide you with the amount you paid as premiums, i.e., ₹30,000 (3000 x 10).
Some benefits of getting a term insurance plan with maturity benefits:
- Survival benefit:
Unlike a regular term insurance plan, the term insurance plan with maturity benefit provides the policyholder with a premium return benefit. These benefits are paid to the policyholder as survival benefits if they survive the term of the plan. It is an optimal product for individuals who do not want to lose out on the premiums they have paid to keep the policy in effect.
- Assured returns:
There are several term plans and different life insurance policies available with different insurance providers. Many insurance policies offer great returns, but these returns are generally market-linked, and the returns are not always guaranteed. However, with the return of premium term plan, you get guaranteed returns from the plan.
Since you get a clear idea of the amount you get from the plan, you can plan accordingly. You can use the life insurance lump sum obtained through the plan and use it for different events which requires a large sum of money, like renovating a house, buying household appliances and furniture, etc.
- Add-ons benefit:
Like the regular term plan, the term plan with return of premium allows the policyholder to increase the coverage by adding add-ons to the plan. Adding these riders are entirely optional and will depend on you if you want to include an add-on or not. You can add riders like accidental death, critical illness and accidental disability to your plan.
When you add these riders, you can get assured coverage for different circumstances at affordable rates. Adding a rider will increase the premium amount you pay on the plan depending on the rider you choose.
- Tax benefits:
Buying term insurance with a return on premium offers you the opportunity to reduce your tax liabilities. Under Section 80C of the ITA (Income Tax Act), the premium payments made towards the policy are eligible for tax benefits for up to ₹1.5 lakh annually.
Thus, if you are looking for an insurance plan that provides you with guaranteed returns, you could opt for a term plan with return on premium. It is an optimal plan for investors who are looking for a guaranteed returns insurance plan. The returns earned on the premiums can also double up as a future savings corpus or fund some important expenses.