TROP for Self-Employed Individuals: Complete Guide

For self-employed individuals, financial planning can sometimes feel uncertain. Irregular income cycles and the absence of employer benefits mean that creating a solid long-term financial strategy requires extra thought and flexibility. But that doesn’t mean self-employed individuals can’t get life insurance or secure their financial future. In this article, you’ll learn how TROP for Self-Employed Individuals works and how it can benefit them.

For self-employed individuals, financial planning can sometimes feel uncertain. Irregular income cycles and...

Term Life Insurance that Welcomes Change

Life Cover Starting @ just ₹18/day*

Change Your Policy Term

As per your life stage and commitments

Hassle-Free Claim Settlement

99.38% Claim settlement ratio*

Smart Income Tax Savings

Save up to ₹54,600* on your taxes

ARN: L0088 | *T&Cs Apply

What are Return of Premium Insurance Plans for Self-Employed Individuals?

Term Insurance with Return of Premium (TROP) is a type of term life insurance. This policy includes life coverage with a guaranteed return of all premiums paid, provided the policyholder survives the entire term. If the policyholder passes away within the policy term, the nominee shall be entitled to the sum assured, by way of a death benefit. With its dual benefits, TROP is well-suited to meet the needs of self-employed individuals, such as freelancers, small business owners, and independent contractors.

Benefits of Return of Premium Insurance Plans

Return of premium insurance plans can act as a financial blanket, helping policyholders through various financial needs and stages:

For Irregular Cash Flows

Unlike salaried individuals whose paydays are predictable, a self-employed person’s income can vary every month. Because of this, ROP plans offer various premium payment frequencies: monthly, quarterly, annually, or limited pay. This allows a policyholder to align their premium liability with the timing and availability of cash flow, reducing any financial strain while still keeping their protection.

Savings for Retirement or Emergency Needs

The absence of employer-backed retirement benefits can create gaps in financial planning for self-employed individuals. A structured savings scheme may fill these gaps. Given the guaranteed return of premium at maturity, TROP helps build a lump-sum corpus for future needs without the uncertainty of market-linked products.

Tax-Considerations

TROP plans offer double-taxation benefits. Your premiums qualify for deductions under Section 80C. Additionally, the maturity benefits are exempt under Section 10(10D), given that certain conditions are met. This helps reduce tax liability and develop tax-free funds for the future.

Predictable, Risk-free growth

Numerous self-employed professionals value financial products that offer stability. Unlike ULIPs or mutual funds, TROP has no investment exposure to equity or market-linked instruments. The guaranteed benefits, along with a steady and reliable structure, make TROP an ideal option for those with irregular income.

Return of Premium Insurance Plans: Riders and Add-ons

With additional rider benefits, self-employed individuals can boost their TROP policies to be more comprehensive.

Accidental Death Benefit Rider

Provides an additional payout to your nominee if your death occurs due to an accident. This offers extra financial support during difficult times.

Waiver of Premium Rider

Waives the premium if you're unable to pay future premiums due to a serious illness or disability. Your policy, however, remains active without you needing to pay future premiums.

Other Custom Riders

These may include critical illness cover, accidental death benefits, and more to offer protection against unforeseen life events.

How to Choose a Self-Employed Return of Premium Insurance Plan

As someone managing business and personal finances, the key is finding the balance between protection, affordability, and flexibility while picking self-employed return of premium insurance plans. Here’s how you can make a more informed decision:

Start from Your Financial Reality

Estimate your current liabilities, loans, family needs, and business expenses. Choose a sum assured that covers those. If your income varies, go for plans with more flexible premium payment terms (monthly, quarterly, or limited pay).

Compare Plans, Not Just Prices

Don’t go with the cheapest plan. Look at what you are getting. Use term insurance premium calculator tools to check if the premium aligns with the benefits provided.

Prioritise the Right Riders

Consider riders like Waiver of Premium (in brief, if disabled) or Accidental Death Benefit, Critical Illness cover, etc.

Check the Claim Settlement Ratio (CSR)

Before buying a TROP plan, always check for insurers with CSRs above 95%. These insurers settle most claims on time, thereby supporting your family financially in times of need.

Read the Fine Print

Understand what the policy states in case you miss one or more premium payments. Check the rules regarding payment terms, exclusions, policy surrender, and any applicable refund conditions to avoid unexpected situations.

3 Disadvantages of TROP for Self-Employed

Consideration	What It Means

Higher Premiums	TROPs are 1.5 to 3 times more expensive than standard term plans due to the guaranteed return of premiums.
Funds Not Available Until Maturity	You won’t be able to access the money until the policy term ends.
Risk of Policy Lapse	Missed premium payments can cause the policy to lapse.

Conclusion

Self-employed return of premium insurance plans are a combination of protection and savings. Even with an uncertain income, you get a life cover with guaranteed returns and tax incentives. It can be a viable option depending on where you stand with your goals. It is one of the stable and flexible insurance choices for self-employed individuals looking to secure their future.

FAQs

Can the self-employed get term insurance?

Yes, self-employed individuals can get term insurance. Most insurers accept applications from freelancers, business owners, and independent professionals, provided they can show proof of income.

Who is not eligible for term life insurance?

People with serious medical conditions, poor financial records, or those above the insurer's maximum age limit may be denied coverage.

Can freelancers get term insurance?

Yes, freelancers are eligible for term insurance. To verify their income, they may need to submit documents like income tax returns or bank statements.

What is a term plan for self-employed people?

A term plan for self-employed people offers financial protection for their loved ones. These plans provide flexible payment terms and optional riders to suit variable income patterns.

Which insurance is good for someone who is self-employed?

Term insurance plans are highly beneficial for the self-employed due to their affordability, flexibility, and financial protection for loved ones.

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

The best TROP plan depends on your age, income, coverage needs, and financial goals. It is always wise to look for plans that offer guaranteed returns, flexible payment terms, and optional riders for enhanced protection.

What is the best term insurance plan for a self-employed person?

The best term insurance plan for self-employed individuals balances protection and return. Term Return of Premium plans are often preferred because they refund all paid premiums on survival. Look for plans with flexible premium options, high claim settlement ratios, and customisable riders.

Can self-employed individuals get life insurance?

Yes, self-employed individuals can get life insurance. While the eligibility criteria are generally the same as for salaried individuals, self-employed applicants may need to provide additional income documentation.

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.