Who Should Buy TROP Insurance?

The Term Insurance with Return of Premium (TROP) is gaining popularity among policyholders who need insurance protection and a maturity benefit. A pure term insurance plan provides life coverage only, while a term plan with a return of premium provides life coverage plus a refund of all premiums paid if the insured survives the term. This article will discuss nuances such as who should buy return of premium term insurance (suitable candidates), their risk profiles, and more.

The Term Insurance with Return of Premium (TROP) is gaining popularity among policyholders...

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Understanding Term Insurance with Return of Premium (TROP)

In simple terms, Term Insurance with Return of Premium (TROP) is a type of life insurance plan that provides two key benefits:

A death benefit is paid to the nominee if the policyholder passes away during the term.
A full refund of premiums paid (excluding rider charges) if the policyholder survives the entire policy duration.

TROP is ideal for individuals who want life cover but also wish to recover their premium amount if no claim is made during the policy term.

Who Should Buy Return of Premium Term Insurance?

The answer depends on how well it aligns with your financial goals. So, let’s analyse your needs and discuss if Term Insurance with Return of Premium (TROP) is the right fit for you.

1. Risk-Averse Individuals Seeking Guaranteed Returns

If you prioritise financial security over high-risk investments, TROP gives you peace of mind with:

Life cover throughout the policy term
Premiums are returned if no claim is made

2. Salaried Professionals with Long-Term Financial Planning

TROP policy is an excellent match in ongoing financial planning for the working middle-income individuals aged 25 - 40 years. It offers cover:

Life cover during working years
Lump sum refund at maturity, which can be used for goals like children’s education or retirement corpus

3. Parents and Primary Earners

Primary breadwinners, especially those with dependents, can ensure the financial stability of their loved ones. TROP plans can:

Provide security during the earning life
Cash out at the end of the term as savings for retirement or other needs

4. Self-Employed Professionals with Irregular Income

Entrepreneurs and freelance professionals often deal with unpredictable earnings. Many hesitate to invest in insurance plans that do not offer maturity benefits.
For them, a TROP plan can be useful in two ways:
It acts as a disciplined savings tool.
It offers reassurance that their premiums will be returned if no claim is made.

5. Individuals with Tax-Saving Objectives

TROP plans give deductions under:

Eligible for Section 80C deduction (up to ₹1.5 lakh on premiums paid).
Maturity proceeds from a TROP plan are exempt from tax under Section 10(10D), subject to policy conditions being met.

If you haven’t fully utilised your Section 80C limit, TROP premiums can help you maximise it, alongside options like ELSS, PPF, or EPF.
Note: Tax benefits and maturity payouts are subject to prevailing tax laws and policy terms. Always read the policy brochure carefully.

Who Might Avoid a TROP Plan?

Although Return of Premium Term Insurance (TROP) provides life coverage along with a return of premiums, it may not suit everyone’s financial needs or risk profile. Let’s explore whether you fall into any of these categories:

Cost-conscious buyers looking for maximum coverage
Investors are comfortable with market risks
Those requiring flexible or short-term life coverage
People nearing retirement

Key Factors to Consider Before Choosing a TROP Plan

Before selecting a Term Insurance with Return of Premium (TROP), it is essential to evaluate the financial implications and plan features. Here are four important aspects to keep in mind:

1. Opportunity Cost

TROP premiums are significantly higher than regular term plans. The extra amount paid could potentially earn better returns if invested elsewhere. Always compare term plan premiums with possible returns from alternate investments.

2. Surrender Value

Unlike pure term plans, TROP policies offer a surrender value after a few years. This provides a degree of flexibility if your financial situation changes unexpectedly.

3. Riders and Add-Ons

Many TROP plans offer optional riders, such as critical illness or accidental death benefits. Assess these carefully to enhance your policy’s coverage based on your specific needs.

4. Policy Tenure and Entry Age

Starting early, ideally in your 20s or early 30s, helps lock in lower premiums and ensures longer coverage. Age at entry plays a key role in determining affordability and long-term benefit.

Conclusion

Choose a TROP plan with affordable premiums, sufficient coverage, and a reliable insurer to meet your protection needs. It is ideal for risk-averse individuals, salaried professionals, family breadwinners, and those who want a guaranteed return along with life coverage. The ultimate choice should depend on your financial goals, life stage, and risk profile. TROP can complement a balanced financial portfolio where protection and saving come together.

FAQs on Return of Premium Term Insurance

1. What is the difference between TROP and pure term insurance?

A TROP plan provides life coverage, plus it refunds premiums if the policyholder survives the term, whereas a pure term plan provides only life coverage.

2. Is the return of premium term insurance worth it?

Yes, TROP is an ideal option for those who want life coverage and guaranteed returns. However, a return of premium plan will be costlier than a standard term plan.

3. Can I surrender my TROP plan before maturity?

Surrender is allowed in many TROP plans after a certain minimum period.

4. Who should buy return-of-premium term insurance?

Return-of-premium term insurance is best for risk-averse individuals, salaried professionals, and family breadwinners who want life cover with a guaranteed return.

5.Can I add riders to a TROP policy?

Yes, you can add riders like critical illness, accidental death, and more to a TROP policy to enhance your coverage based on your needs.

6. How do I choose the best term insurance with return of premium?

Choose a term insurance plan with return of premium by balancing affordable premiums, sufficient coverage, and a reliable insurer.

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.