Regular Term Plan vs Term Insurance with Return of Premium

source: livemint

Term insurance plans enable individuals to secure the financial interest of their households. If they pass away prematurely, their family gets a lump sum amount as a death benefit. Nevertheless, regular term plans do not offer any benefit if insured individuals survive the pre-specified policy term.

If you want to secure both survival and death benefits, you can go with term insurance with return of premium plans. Let us do a comparison of the term plan with the return of premium (TROP) with the regular term plan, to help you choose the suitable plan for you.

A regular term insurance plan is a policy in which insured individuals get only the life cover. In case they die within the policy period, their insurance company agrees to pay a certain sum to their beneficiaries.

This benefit allows one to protect their family's financial interest when unfortunate eventualities cause a stoppage of the overall household income. However, if policyholders survive the maturity period, their insurance companies will not provide any sum.

Term insurance with return of premium or TROP is a financial agreement to primarily give you a life cover like the term insurance plan. The additional benefit of this policy is a pay-out that you get after maturity.

Therefore, if policyholders pass away within the term, their beneficiaries will be able to claim the guaranteed death benefit. This way, insured individuals' families can get a financial respite after they stop being their source of income. Otherwise, if they survive until the term ends, insurance companies will be liable to return the premiums they have paid throughout the tenure.

For a proper comparison between the term plan with return of premium with the regular term plan, you need to know the common grounds between these two types of plan. Following are some similarities between TROP and term insurance plan:

• Tax Benefits: According to Section 80(C) of the Income Tax Act of India, you can leverage tax deductions for up to ₹ 1.5 Lakhs on both these types of term insurance policies. Furthermore, as per Section 10(10D), the sum assured amount of both types of term insurance plans may come with zero tax liabilities if it meets certain conditions.
• Riders: You can include riders or add-on covers with the regular term plan and TROP to secure supplementary coverage on top of the policy benefits of your base plan. You can buy several riders like this accident death cover, including critical illness benefit, waiver of premium, income benefit rider, etc.

Now that you are aware of the comparison of the term plan with return of premium (TROP) with the regular term plan, you can determine which plan will be more suitable for you. If you want to secure only the life cover at an affordable premium, you can purchase a term plan. Otherwise, you can go with a TROP policy since it also extends the survival benefit.