Term Insurance with Return of Premium (TROP) is a type of Term Life Insurance (TLI) policy that offers a refund of the total premium paid if the policyholder outlives the policy term. This type of policy provides the benefits of a traditional TLI policy, such as financial protection for the policyholder's family in the event of their untimely death, while also providing a savings component.
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Here’s how Best Term Insurance with Return on Premium functions.
For example, Radhika, a 35-year-old IT professional and the breadwinner for her family, chooses the best Term Insurance Plan with Return of Premium (TROP) so that, if anything goes wrong, her husband and two young children are financially protected. She selects coverage of ₹1 crore for 25 years. This plan ensures that death benefits are guaranteed. The amount will go directly to her family if she passes away during the term. If she survives the term, she will receive a refund of all the premiums she paid, making it a secure choice for her family’s future.
Term Insurance with Return of Premium (TROP) offers several benefits to policyholders. Some of its key benefits are as follows.
TROP offers life coverage to ensure your family is financially secure in case you’re not around. The sum assured can go a long way in helping with financial commitments, giving you peace of mind that your loved ones are well cared for. Choosing the best Term Plan with a Return of Premium adds an advantage for the policyholder, as it offers the potential for a refund of premiums if the policy term is completed without a claim.
Besides, life coverage with TROP entitles a policyholder to a refund. The return is generally the premiums paid, without interest or bonuses, unless specified in certain plans.
Term Insurance policies, including TROP, have some of the lowest premiums compared to other types of insurance coverage. This makes it an affordable option for those with limited budgets and incomes.
TROP plan encompasses a saving feature. If the policyholder survives the Life Insurance Policy, then he or she will get his or her premiums back. This makes it suitable for people who want insurance coverage against their lives and save money in the long run.
TROP provides tax deductions under Section 80C, and the maturity benefit under Section 10(10D) is tax-free if premiums do not exceed 10% of the sum assured. This makes it one of the best policies for tax savings, and in terms of returns, it stands out as the best Term Plan with return.
Please Note: Tax benefits on life insurance are available under the old tax regime for premiums paid, but if you opt for the new tax regime, you will not be able to claim these deductions (e.g., under Section 80C).
However, death benefits (sum assured) are tax-free under Section 10(10D) of the Income Tax Act, provided the premium paid is not more than 10% of the sum assured for policies issued after April 1, 2012. If you invest in a TROP plan and survive the policy term, you will receive a premium refund with no TDS. However, if you make a claim during the policy term (in case of death), TDS might apply, depending on the policy’s terms.
Here are the eligibility criteria for TROP:
You can buy a TROP at the age of 18 years and above.
The maximum age to buy a Term Insurance policy is 70 years.
The maximum amount insured under this plan is ₹10 lakhs (1 million rupees).
The claim process for TROP is generally the same as for traditional TLI policies. Here are the general steps involved.
In the event of the policyholder's death, the beneficiary or legal representative must notify the insurance company as soon as possible. The insurance company may require documents such as a death certificate to process the claim.
Once the insurance company receives notification, they will furnish a claim form. The beneficiary needs to fill this up and, according to what caused the death, attach pertinent documents such as medical reports or police statements. It then ensures that the claims are processed accurately and efficiently.
The insurance company will review the claim form and supporting documents to determine if the claim is valid and covered under the policy. This may involve an investigation or review of the policyholder's medical history.
If the claim is approved, the insurance company will pay the death benefit to the beneficiary. In the case of TROP, if the policyholder outlives the term, they will receive a tax-free return of the premiums paid.
It's important to note that the specific claim process may vary depending on the insurance company and policy. Review the policy terms and contact the insurance company for guidance on the claims process. Also Read: Life Insurance Claim Process and Required Documents
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