Is TROP Worth It? Analysing Pros and Cons

As life insurance continues to play a key role in financial planning, many people wonder: "Is Term Insurance with Return of Premium worth it?" Term insurance with return of premium (TROP) essentially offers life cover and a money-back facility if you outlive the term. This article covers the cost-benefit analysis of TROP, with explanations of its pros and cons. It also highlights the unique value TROP offers, while providing an alternative investment perspective to help you make a well-informed financial decision.

As life insurance continues to play a key role in financial planning, many...

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What is TROP?

TROP or Term Insurance with Return of Premium is a life insurance policy that returns all the premiums paid (excluding GST) if the policyholder survives the term. This means, unlike a standard term plan, you get back the money you paid (premiums) over the years if you outlive the policy term. Therefore, TROP can be a good option to consider, especially if you are looking for a life insurance plan that is a blend of protection and savings.

Is Return of Premium Term Insurance Worth It?

Let's conduct a cost-benefit analysis and financial sense evaluation for an Indian income earner.

Premium Refund

At the policy maturity, you receive your premiums back if no claim is made.

Psychological Satisfaction

Many Indians prefer getting returns, not just protection. TROP caters to that thought.

Savings

TROP helps you save money (you get your money back) while also providing life coverage.

Tax Benefits

Premiums paid are eligible for a deduction under Section 80C, and the proceeds received on maturity are tax-free under Section 10(10D), where the prescribed conditions stand fulfilled.

High Premiums

TROP policies are costlier than traditional term life insurance, about 1.5 - 3 times.

Limited Growth in Investment

Although TROP policies pay premiums back at the maturity of the term, they do not earn returns or interest in the long run. For some, this may feel less rewarding compared to investment-based options.

Complexity

TROP policies can be more complicated to understand than regular term plans because of the return-of-premium feature.

Lower Coverage for the Same Premium

Due to the return-of-premium feature, TROP offers lower life cover than a regular term plan for the same premium amount.

TROP vs. Pure Term Plan: A Cost Comparison

Rahul, a 30-year-old IT professional, is considering buying a ₹1 crore term insurance plan for 30 years to safeguard his loved ones and also wants returns. He has two options:

Option 1:

Term Plan – Pay ₹11,000 per year and invest the savings.

Option 2:

TROP Plan – Pay ₹27,000 per year, with a guaranteed refund.

Since Rahul prefers both protection and a refund of premiums, he chose the TROP plan despite the higher premium because it fits his unique preferences.

Who Should Consider Buying TROP?

Those seeking guaranteed maturity benefits, as TROP offers a refund of premiums paid.

Individuals who want to invest for a shorter time or find it hard to save on their own may prefer insurance-linked savings plans.
Individuals who want the peace of mind that comes with getting their money back if no claim is made.

Why Choose ACKO Life Flexi Term Plan

The ACKO Life Flexi Term Plan provides your loved ones with a financially stable future, with the amount of money you choose for them. With an easy claim process and swift payouts, your loved ones can get the financial support they require without hassle during crucial times. The unique features of this term plan:

Adaptable Sum Assured

Increase or decrease your sum assured/coverage based on your life stages and changing needs.

Flexible Policy Tenure

Increase or decrease your policy duration as your financial dependents, loans, lifestyle and income change.

Flexible Payout Options

Choose whether to settle the claim with monthly payments or a one-time full payment.

Will Creation Service

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Affordable Premiums

Get comprehensive coverage with affordable premiums that are fair and budget-friendly.

Simple Claim Process

Easily purchase or make claims on your term plan with just a few steps.

Riders Available: Critical illness, accidental death, and permanent disability riders are available to enhance the scope of your ACKO Life Flexi Term Plan coverage.

How to Choose the Best Term Insurance with Return of Premium

Selecting the most suitable Term Insurance with Return of Premium (TROP) requires careful evaluation of both policy features and financial implications. Key factors to consider include:

Premium Amount vs. Maturity Benefit

Assess whether the premiums paid justify the total refund amount at maturity.

Claim Settlement Ratio of the Insurer

To ensure reliability, opt for insurers with a high claim settlement ratio.

Lock-in Period and Surrender Conditions

Review the terms related to policy lock-in, early termination, and associated charges or penalties.

Policy Tenure and Premium Payment Frequency

Choose a plan with a duration and payment schedule that aligns with your financial goals and cash flow.

Conclusion

TROP plans offer a combination of insurance protection and premium returns, which may appeal to individuals who value a guaranteed return on life insurance. However, they tend to be more expensive than standard term insurance. Ultimately, whether TROP is worth it depends on your financial goals, risk appetite, and need for disciplined savings. When buying one, explore the policy’s features, premium amount, maturity benefits, and more to ensure you choose the right plan based on your needs.

FAQs on Return of Premium Term Insurance

1. Is term insurance with return of premium a good investment?

TROP can be a good investment if you want life coverage and a guarantee of returning your premiums.

2. What is the benefit of return of premium in term insurance?

The key benefits of TROP are the return of full premiums (taxes excluded) if you survive to the end of the policy term, alongside life coverage.

3. Which is the best term insurance plan with return of premium?

Determining the best TROP plan depends on factors such as your age, how much coverage you will need, and the premium you can afford. To find the best one, compare TROP plans from the leading insurers.

4. Can I surrender a TROP policy before maturity?

Most TROP (Term Return of Premium) policies do have a surrender value, but only after a minimum lock-in period, depending on the insurer and policy terms.

5. How are TROP policies taxed?

Premiums paid are eligible for deduction under Section 80C, and the maturity amount is generally exempt from tax under Section 10(10D), subject to conditions.

6. What happens if I stop paying premiums in TROP?

If you stop premiums with TROP, it may lapse or become paid-up, which will reduce your benefits. Some plans may have a grace period or provide a surrender value.

7. Why is TROP more expensive than regular term plans?

TROP plans are more expensive because they provide insurance cover and the guarantee of premium return, whereas standard term plans only provide you with pure protection.

Written by Neviya Laishram

1.7K Linkedin Followers

Reviewed by Vaibhav Kumar Kaushik

A senior editor with years of expertise, she fine-tunes content that connects, converts, and builds trust. She transforms heavy life insurance concepts into clear, aha-moment reads. Writing is her passion, and thinking ahead is second nature. When not wrangling words, she’s crushing game levels because every challenge is a puzzle waiting to be solved.