In today's rapidly changing financial marketplace, selecting the appropriate insurance policy is paramount to achieving long-term financial stability. Among the various insurance plans available, Return of Premium Term Insurance (TROP) has gained popularity among risk-averse individuals. But is it a good investment? Let's analyse expert opinion to assist you in your decision-making.
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Is Return of Premium Term Insurance a Good Investment? Expert Analysis.
A return of premium term plan ensures that the insurer refunds the total premiums paid if the policyholder survives the policy term. This differs from a traditional term plan, where no premiums are returned unless a claim is made during the policy term.
In other words, return of premium life insurance offers a money-back guarantee if the policyholder is alive at the end of the policy duration.
Before concluding whether the return of premium term life insurance is a good option for you, let’s understand its basic features:
Pays a death benefit to your beneficiary if you pass away during the policy term.
You will get all the premiums back if you survive the term.
In terms of savings, any premiums you paid are eligible for a deduction under Section 80C of the Income Tax Act.
Return of premium term insurance charges fixed premiums throughout the policy term.
As you know, the premium for a TROP policy is higher than that of a standard term plan. So, opportunity cost is an important factor to consider when evaluating TROP policies. Think about what the extra premium paid for a TROP policy could become if invested somewhere else.
For example, if a basic term plan costs ₹10,000 annually and a TROP version costs ₹25,000, the extra ₹15,000 could instead be invested each year in mutual funds or a PPF. Over the policy term, this investment could grow more than the simple premium refund offered by the TROP plan.
Given below is a comparative analysis of the TROP and Pure Term Plans:
| Parameter | TROP Plan | Pure Term Plan |
| Premium | Higher | Lower |
| Death Benefit | Available | Available |
| Survival Benefit | Refunded Premiums | Not Available |
| Flexibility | Low (may vary depending on the specific policy and insurer) | Generally higher compared to TROP |
The return of premium term plan has its pros and cons. Knowing them can help you decide whether this policy works for your financial goals and risk tolerance.
If you survive the policy term, all premiums paid will be refunded.
You get life coverage during the policy term and a full refund of premiums paid
Tax benefits under Section 80C and Section 10(10D).
TROP plans are typically 1.5 -3 times expensive than standard term insurance plans.
In the long run, the internal rate of return (IRR) of TROP plans is normally less than that of mutual funds or PPF
Premium refunds are not adjusted for inflation. This means the refund amount remains fixed and does not increase over time.
So, is the return of premium life insurance a good investment? Think of TROP as a hybrid: part insurance, part low-yield savings. It provides psychological comfort and the assurance of "not losing money," which resonates with many policyholders. For individuals who prioritise guaranteed returns over potentially higher-yielding investments, term insurance return of premium can be an ideal option.
While Return of Premium Term Insurance (TROP) offers guaranteed refunds and life cover, it may not be the preferred choice for everyone. Here are the types of individuals who might consider other options:
Return of premium term insurance is a great option for those who prefer certainty and risk-free outcomes. While it is not a high-yield investment alternative, it serves as a valuable and effective financial planning tool for certain demographics. If you prioritise guaranteed returns, then return of premium term insurance is a great investment for you.
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Reviewed by Vaibhav Kumar Kaushik 
Acko Technology & Services Private Limited
#36/5, Hustlehub One East, Somasandrapalya, 27th Main Rd, Sector 2, HSR Layout, Bengaluru, Karnataka 560102
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