Return of premium in term insurance: How you can get your premium back in full

Posted on Mar, 2021

Term Insurance plans are one of the most straightforward and affordable insurance policies available for someone looking to ensure a financially secure future for his/her family. A Term Insurance policy offers death benefits to the policyholder’s beneficiaries as a one-time lump sum amount. However, term insurance policies do not provide any benefit on the maturity of the policy term. Therefore, after the policy tenure is over, the policyholder does not benefit from the premium amount deposited throughout the policy period.

Through the Return of Premium feature, a policyholder can extend a traditional term insurance policy to offer maturity benefit along with a death benefit.

What is Return of Premium in Term Insurance?

Term plan with return of premium, also known as TROP or ROIP, is a type of term insurance plan that specifically caters to the situation where the policyholder survives the policy term. With the return of premium feature, a term insurance policy pays back all the premium amount paid over the years in full to the policyholder at the end of the policy term. However, with the added feature of returning the premium, such policies’ premium amount is slightly higher than a traditional term insurance policy.

For example, consider a policy with 50 lakh as the sum assured for 10 years at an annual premium of Rs 3000. Under the TROP, if the policyholder dies, the family is provided with a death benefit of Rs 50 lakh (sum assured). In case the policyholder survives the policy term, the insurance company offers the whole premium amount, i.e., Rs 30,000 (3,000x10), as the survival benefit.

Benefits of Adding Return of Premium to a term insurance plan.

The return of premium in term insurance offers some additional benefits along with provides the primary benefits of a term insurance policy:

  • Maturity Benefit:

    The most distinctive feature of return of premium in term insurance is its ability to offer a maturity benefit by returning the policyholder’s premium amount. The features ensure that the premium paid does not prove futile if the policyholder survives the policy term.
  • Assured Returns:

    A traditional term insurance policy only provides a death benefit in the event of the policyholder’s death. However, with the return of premium in term insurance, the policyholder is ensured assured returns even if he/she is not eligible to claim the death benefit.
  • Traditional Benefits:

    The return of premium in term insurance doesn’t hinder any term insurance policy’s traditional benefits. You can add riders such as critical illness, accidental death benefit, etc., to the existing policy to make it more suitable to your lifestyle.
  • Tax Benefits:

    Investing in term insurance with a return of premium also offers tax benefits to the policyholders. A policyholder buying term insurance with a return of premium is allowed deductions on the premium amount up to Rs 1.5 lakh under section 80C of the Income Tax Axt, 1961. Furthermore, the payout given as the death benefit is exempt from tax under section 10(10D) of the tax laws.

Complex insurance policies and the high premium amount has always been the main reason in India for people being skeptical on buying insurance. A term insurance policy provides a great way to protect against eventualities without going through the complexity or churning out high premium amounts. With the return of premium, a policyholder can further ensure that the premium paid throughout the policy term adds value as the survival benefit. Although the premium amount may be slightly higher for a return of a premium term insurance policy, you can be sure that the insurance company will return the premium after the policy’s maturity.

PINC Insurance is an insurance broker dedicated to innovation and offering comprehensive term insurance plans backed with the feature of return of premium. The experts design and recommend policies that are the most suitable and comprehensively cover your every insurance need. You can visit PINC Insurance for buying ideal term insurance policies with the return of premium.