Pros and Cons of Term Insurance Plan with Return of Premium

While deciding which term plan to buy, it is necessary to understand your future needs. You need to understand what your family members may require the money for in the future. The major purpose of any term insurance plan is to secure your family’s financial future.    

Table of Contents

• Term Insurance Plans with Return of Premium - Pros and Cons
• Six Features of Term Insurance Plans with Return of Premium
• Who Should Consider a Term Plan with Return of Premium?
• Wrapping up

Families that depend on a sole breadwinner need a security plan that can ensure comfort and financial security in the future in case of the demise of the breadwinner of the family. Though with the usual term insurance plans, the rule that the policyholder will get zero in return if they outlive the policy makes it risky. Term insurance plan with return of premium means all the premiums the policyholder has paid will be paid back to them in case they outlive the policy term. But is this added feature truly beneficial, or does it come at a cost? Let’s explore the advantages and drawbacks to help you make an informed decision.

Term Insurance Plans with Return of Premium - Pros and Cons

A term plan with a return of premium has some pros and some cons as well. However, the plan may fulfil your needs and address the future wants of your family members. Weigh your decisions after understanding the pros and cons of a term plan with return of premium:

Six Features of Term Insurance Plans with Return of Premium

Listed below are the essential features of the term plan with return of premium that makes it an ideal option for people looking to get complete protection with a term plan:

1. Maturity Age

When you sign up for a normal term policy, you will notice that most banks and insurance providers offer a maturity age of 70 years or around it. In such cases, the policyholder cannot get any time to utilise the money that they saved up over the years. In case of return of premium term plan, you can choose to sign up for a 5 to 30-year term or any other duration of their choice, as the returns are guaranteed even if the policyholder is living upon maturity.

2. Payment Options

There are a plethora of payment options under the term plan with return of premium. Based on your needs and situation, you can choose a suitable payment option. These options include monthly, quarterly, half-yearly, and yearly payments. The insured can also choose to pay a lump-sum amount for the term plan.

3. Death Benefit

The term insurance plans with return of premium also ensure a significant amount is paid under the death benefit. This is provided along with the returns in case the policyholder dies before the maturity age of the term plan.

4. Survival Benefit

This is the feature that makes term plans with a return of premium different from all other term plans. Even if the insured survives after the maturity of the plan, they can claim the complete returns of the insurance payments that have been paid by them over the years.

5. Surrender Value

The surrender value is applicable when the person insured under the policy chooses to surrender the plan midway through its term. The best benefit you can get in such cases is if you choose to pay the premium of the plan in a lump sum. If you pay a premium at regular intervals, then the surrender value will be equal to the total of the premiums paid by you up to the time of surrender.

6. Rider Benefit

You can choose to add on various riders along with the original term insurance plan with a return of premium for better security. These riders range from critical illness riders to accidental death riders, etc. Now that you have understood the various features of the term plan with return of premium, you must have received an idea regarding how it carries more benefits than usual term plans.

The term plan with return of premium may be the perfect choice for some, while for others, it may fail to provide the terms and conditions that they need. Thus, the final decision lies with the varied needs and requirements of different people.

Who Should Consider a Term Plan with Return of Premium?

A return of premium (ROP) plan works best for individuals who:

• Prefer Guaranteed Returns: If you’re uncomfortable with the idea of paying premiums without getting anything back (as is the case in pure term plans), an ROP plan offers peace of mind by returning your premiums at maturity.
• Have Stable Income and Long-Term Planning Goals: Since ROP plans generally come with higher premiums, they are better suited to people with consistent earnings and long-term financial commitments.
• Want a Low-Risk Savings + Protection Hybrid: This plan can serve dual purposes, i.e., insurance plus a low-risk savings component, making it appealing to conservative investors.
• Young Policyholders: Buying early usually means lower premiums and longer tenure to build benefits, making ROP plans more affordable and advantageous over time.

Wrapping Up

A Term Insurance Plan with Return of Premium (TROP) is a type of life insurance policy that not only offers death protection but also refunds the total base premiums paid (excluding taxes and riders) if the policyholder survives the policy term.

Unlike standard term plans that provide no maturity benefit, TROP ensures that the policyholder does not “lose” their money if the policy term ends without a claim. This feature makes it attractive for individuals who want both risk cover and a savings fallback.

However, this benefit comes at a cost. The premiums for TROP policies are typically 1.5x to 2x higher than those of standard term insurance plans.

But if you need a short or long-term savings plan, then such a policy is the perfect choice for you as it assures returns. 

We, at Canara HSBC Life Insurance, offer flexible and reliable Term Insurance Plans with Return of Premium, designed to meet diverse life stage needs. With a strong legacy, transparent claim settlement record, and customisable options including riders, we can help you build a secure future for yourself and your family.