Exploring the Benefits of Term Insurance with Return of Premium

Term insurance is more common with people who want basic insurance at low rates as compared to permanent insurance. However, one weakness has always been that if the policyholder has not died before the terms of the policy they do not get any benefits from it. This is where term insurance with return of premium (TROP) comes into play, offering the best of both worlds: protection and savings.

About Term Insurance with Return of Premium

Term insurance with return of premium is just a term insurance policy product where the policyholder receives back all the premium amount they paid for this policy if he/ she survives the terms of the policy. Conventional term insurance is a pure death benefit plan, but in TROP, you are guaranteed to get your money back, which is somewhat appealing to many people.

How Does TROP Work?

If you buy a term insurance with a return of premium plan, you pay the usual premium as you would when you are getting a traditional term policy. The major difference is that if you survive the policy term, the insurer pays back all the premiums paid towards the policy, and this is subject to recovery of taxes as well as extra rider charges.

Advantages of Term Insurance with Return of Premium

  1. Guaranteed Returns: Another key benefit of TROP is that one receives all the paid premiums in full at the end of the term of the policy which means your capital is not wiped out.
  2. Financial Security: When the policyholder dies during the policy period, the nominee is paid the sum assured, giving the family some sort of protection in terms of finances.
  3. Tax Benefits: TROP policies qualify for exemption under section 80 C of the Income Tax Act in respect of premiums paid. Further, the maturity benefits are tax-exempt under Section 10(10D).
  4. Discipline: This makes it encourages disciplined saving for as you are paying premiums you are committed to paying for them regularly so you can get the return of premium benefit.

Considerations that One Must Look Before Opting for TROP  

  1. Cost: TROP is found to be more costly than regular term insurance life policies because of the return of premium options.
  2. Coverage Needs: It is advisable to set the sum assured to an amount that will meet the needs of your family in case you are no longer around.
  3. Policy Term: Select a policy term and premium that you are comfortable with and take into consideration your future financial obligations.

Analysis of TROP versus Traditional Term Insurance

  1. Cost Difference: Term insurance is cheap with no back-end benefits other than TROP, which is comparatively costly but refunds premiums should you survive the term.
  2. Risk: TROP offers relatively low risk in that people get their premiums back, unlike conventional term insurance where premiums paid are not refunded.
  3. Flexibility: Unlike TROP, traditional term insurance may have more options where premium payment is concerned and thus the policy tenure too.

Who Should Consider TROP?

  1. Risk-Averse Individuals: If you are interested in guaranteed giving but with no risks involved like in an insurance policy then TROP is for you.
  2. Savers: The audiences that may find TROP appealing include those people who are interested in an insurance product that is also a savings product.
  3. Tax Savvy: Those intending to continue enjoying tax incentives can tap the additional tax deductions that TROP offers.

Real-Life Example of TROP

Let there be Sarah, a non-smoking 40-year-old woman of great aspiration to ensure her family and at the same time, save. She buys a term insurance with a return of premium on the policy which has a term of 20 years with an amount of Rs. 30,00,000. She pays a higher amount of premium compared to ordinary term insurance policies but is confident that if by any chance she survives the policy period, she will get back her premium paid plus some percentage of it that she can use for other purposes.


The plan that best suits the interests of a customer who needs both risk coverage and savings is term insurance which offers a return of the premium. When you have decided to subscribe to TROP, you benefit from understanding how it works, and the comparative advantages of using it over other systems to guarantee the safety of your money and returns.


  • Is TROP pricier than standard term assurance policies being offered in the market?

Yes, in as much as TROP policies come with stringent underwriting requirements coupled with the return of premium short-term features or frills, then TROP policies are relatively more expensive than other traditional policies.

  • Do the TROP policies provide similar tax benefits as provided for by term insurance policies?

It also has to be noted that premiums paid towards TROP are allowable under Section 80 C of the Income Tax Act while maturity benefits are fully tax-free under Section 10(10 D).

  • Am I able to make a claim on TROP from a standard term insurance policy?

Depending on the Terms and Conditions of the insurer switching policies may prove to be effective. The best course of action in this regard would be to consult your insurance carrier.

If one is unable to make a premium payment of a TROP policy, the following may occur. Failure to make the premium payment means policy lapse or incurring penalties. Ideally, one should not neglect the paying of premiums since it is essential for the insurance company to meet the obligations of the policy.

  • Is TROP good for everyone?

Combined with the rank of TROP and the large number of proposals available, TROP is perfect for those seeking to compromise and receive good insurance coverage while not spending much money. It’s not for everybody, or better still, it may not be economical for those operating under strict financial constraints. 

  • How can I calculate my TROP amount?

You can use the Term Insurance Calculator to determine the tentative cost of your TROP plan. 


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