Term Insurance FAQ: Can I Get the Premiums Paid Back on Maturity?

A term plan is the simplest one among the different life insurance policies available in the market. This form of pure life cover focuses on providing a pre-defined sum assured to the insured’s dependents. It means your family members will get an adequate amount to live their lives comfortably in your absence if you choose a suitable term life insurance policy. Furthermore, you can select a considerably high coverage with a lesser premium at a young age.

Besides all these benefits, many people ask questions about the best term life insurance policy available, one of which is about maturity benefits. They ask about what will happen if they survive the policy term. Let’s dig deeper into this aspect of term insurance to find the truth.

 

A Pure Term Plan Implies Death Benefits Only

Many of us only know what is term insurance from its basic definition – that it provides death benefits in case of the insured’s demise. A common thought that comes to our mind is whether we get anything back on surviving the policy tenure. Particularly, individuals who follow a healthy lifestyle tend to think about this aspect for term life insurance policy.

Think of a 28-year-old male individual who is free from any disease and wants to buy the best term plan for coverage till the age of 60. If he purchases a pure term plan, which is only meant for providing death benefits to his family, he will not get any benefit on outliving the age of 60. There is a misconception that the premiums paid for such a plan go to waste. In fact, the premiums are used to provide insurance coverage for the chosen policy period.

You might be wondering how you can get the premiums refunded with a term life insurance policy. The answer to all such doubts is a term life insurance policy with the return of premium, offering a premium refund basis the maturity of the policy.

Let’s begin with understanding the basic working of term insurance with return of premium.

About Term Plan with Return of Premium (TROP)

 Similar to a pure term life insurance policy, TROP primarily focuses on providing financial support to your loved ones in case something happens to you. Besides this, it also offers a maturity benefit if you survive the selected policy tenure. Hence, you can think of TROP as a variant of term insurance, which also includes survival benefits.

Before you buy the best term life insurance policy, you must know about its various facets in detail.

 

• The survival benefit of TROP is the sum of all the premiums paid to the insurance company over the policy period.
• You are not entitled to receive any interest amount on the premiums paid for a term plan.
• Many insurers offer TROP in the form of a rider to the base term life insurance policy. It means you need to add a TROP rider to the policy at the time of buying it.
• The premium payable for this type of term plans is higher than standard term plans.
• If you include other riders like a waiver of premium with a TROP plan, the rider premiums paid during the policy period will be deducted from the survival benefit.
• The tax treatment of a term life insurance policy with return of premium is the same as that of a standard term plan. The premiums paid can help save tax under Section 80C, while the death or survival benefits are tax-exempt.

 

A term life insurance policy with return of premium is suitable for many policy buyers who seek survival benefits. However, you should keep in mind the finer details of such a term policy before buying one for yourself.

Is Buying a TROP Plan Worth It?

Buying term insurance with return of premium option is highly beneficial because you can get survival benefits with it. What is more important is to consider if you would like to get this additional benefit at a higher premium. The suitability of a TROP plan may differ from one individual to another.

As a thumb rule, consider buying the best term life insurance policy with return of premium if you are hesitant to buy a standard term plan. This way, you will get peace of mind that you have a life cover and get an amount back on surviving the plan period.

You should also know that the suitability of a term life insurance policy should not be only checked in terms of survival benefits. There are several other things you should consider while buying a term plan.

 

• Zero in on a plan that offers maximum insurance benefits at a premium you can easily afford. In case you want a higher coverage but can only pay a certain amount, you can choose an extended policy period.
• Keep in mind to check the CSR or Claim Settlement Ratio of an insurer. This will ensure that your loved ones will get the financial benefits you have planned for them.

 

Source: https://www.policyholder.gov.in/How_to_Buy_Life_insurance_and_From_Whom.aspx