What Is Return of Premium Option Available in Term Plans?

TROP refers to Term plan with Return of Premium option. This plan is same as any other standard term insurance plan with one difference of return of premiums option available i.e. survival benefit at the end of the policy term.

The primary objective of any life insurance policy is to provide financial protection to your family in case of any unfortunate event in your life. Life insurance plans usually fall into two categories:

  • First in which you can grow your money along with a life cover, and
  • Second, which is meant to provide only financial protection to your family called term insurance plans.

In the case of term insurance plans, there will not be any return on investment (ROI). However, the premiums are also nominal. Term insurance plans primarily to fulfil our life insurance needs only by providing a significant amount of money to the nominee in case of the insured’s unfortunate demise.

Most, term insurance plans do not offer any survival or maturity benefit for the policyholder. However, a term insurance plan with return of premium assures the return of the premiums paid for the life cover if you survive the policy term**.

For instance, Mr. Gupta bought a term insurance plan with a return of premium option for a Sum Assured of Rs 1 crore at a premium of Rs 25,000 per annum* with a policy term of 30 years. In the case of his demise within 30 years of buying the policy (i.e., the policy period), his nominee would receive the Sum Assured of Rs 1 crore.

However, if Mr. Gupta survives the policy term of 30 years; he will receive Rs. 750,000 (25000 x 30) {Exclusive of taxes^}.

Nowadays, most people look for insurance plans that can provide a higher life cover at the lowest possible cost of the premium. Term plans fulfil this criterion. However, given the fact that there are no maturity benefits on the policy, many are discouraged from purchasing a term insurance plan.

This made life insurance companies introduce term insurance plans with return of premium (or ROP) additional benefits in them. In other words, a ROP (term insurance with return of premium optional benefit) is a variant of term insurance plans that provides both a death benefit (in case of an eventuality) and a maturity benefit by returning the premium invested**

Are term life insurance premiums refundable?

Being the purest form of life insurance, term insurance plans do not require you to pay a high premium. As a result, you do not receive any returns on the completion of the policy tenure. When you choose the TROP variant of term insurance; you are entitled to receive the entire amount of premium invested towards the plan on the completion of the policy tenure. In other words, if you survive the policy term, the insurance company will refund the amount of premiums* that you have had invested during the policy term**.

Here it is important to note that insurance companies charge a premium as per the value of claims. Therefore, the higher the expectation, the more is the premium. This is the reason why the amount of premium payable increases with an individual’s age and other associated risk factors. In the case of term plan with ROP optional benefit, given the fact that the insurer will pay back the premium after policy completion, the rate of the premium goes on the higher side.

Who can all avail return of premium option?

The minimum entry age to purchase a term plan with return of premium optional benefit (i.e., ROP) is 21 years, while the maximum age of buying this variant is 55 years. You can purchase the term plan with return of premium (for a policy term of either 20, 25, or 30 years while paying a premium for 11 years only (with Max Life Smart Term Plan).

While the premium payable under the plan varies by age, the insurance companies offer a lower premium rate to female buyers than male buyers. Overall, you can purchase term insurance with return of premium optional benefit, if you are -

If you are single – You have your parents who may depend on you for financial support, especially after their retirement. With a term plan with ROP benefit; therefore, you can help take care of their lifestyle expenses, while you get premium back on your term plan upon surviving the policy tenure.

If you are married with no kids – Your spouse may have no one else to look up to for financial support, but you. Therefore, it becomes crucial that you create a financial backup plan to help secure their future in your absence. Even in case nothing happens to you, you will receive the premium back paid under the term plan with return of premium.

If you are married and have kids – Being a parent, you have the responsibility to take care of your kids’ education and marriage expenses. You are also responsible for your spouse’s financial well-being. A term plan with return of premium optional benefit will help you support your family in maintaining their current lifestyle while offering you a maturity benefit on surviving the policy tenure.

Why should you choose a term plan with return of premium option?

All of us want to live a long and eventful life in the presence of our family and friends. To prolong our lifespan and live a healthy life, we make healthier lifestyle choices such as exercising daily and following a wholesome diet plan. We also invest in financial instruments that provide us both income security and wealth creation opportunities, so that we have enough money throughout our lifetime.

Thus, there is ample possibility that if we stay happy, positive, healthy, and away from stress, we can outlive our life insurance plan. So, term insurance with ROP optional benefit comes as an advantage, as it offers to return the premiums to you on your successful survival against the uncertainties of life.

Term insurance with ROP feature (available on payment of additional premium) also offers benefits such as waiver of premium benefit, accidental death benefit, disability benefit, and protection against critical illnesses.

At Max Life Insurance, we strongly believe in the idea that all our customers should stay happy and healthy and live longer. With our TROP variant of life insurance; therefore, we help ensure that you and your family have peace of mind and financial security in all walks of life. 

Is return of premium option costly?

Among all the available life insurance options, term insurance plans provide the higher life cover at the lowest possible cost of the premium. You pay a premium for an amount you choose as the Sum Assured. You can either pay the premium in one go (Single Pay), throughout the policy tenure (Regular Pay option) or for a fixed duration (Limited Pay option). The same premium payment options are available under the term plan with ROP feature as well. However, you may have to pay a slightly higher premium under term plan with ROP option than a normal term insurance plan.

For instance, a healthy, 30-year old male can purchase a term insurance plan from Max Life for a Sum Assured of Rs 1 crore and a policy term of 40 years for approximately Rs. 13,688, payable annually for 30 years (Pay till 60).

On the other hand, buying a term plan with ROP benefit for the same Sum Assured and policy term may cost up to Rs. 11,600^^.

However, unlike a normal or basic term plan, the ROP variant of term insurance provides the entire premium** paid by the policyholder at the time of maturity.  Also, the premium paid towards the plan coverage is exempt from taxation under Section 80C under Income tax act of 1961.

Which Max Life Insurance plans offer ROP optional benefit?

The ROP variant of term insurance is available under Max Life Smart Term (Non-Linked Non Participating Life Insurance Plan (UIN - 104N113V01))

How can you get a term plan with return of premium option??

Finding the right term insurance plan with ROP benefit is an easy task if you keep the following factors in mind:

  • The cover amount must be enough to help secure your family’s financial future in case something happens to you
  • The rate of premium should be affordable
  • The insurer’s claim settlement ratio (CSR) must be high (Max Life Insurance has a claims settlement ratio of 98.74% (as per the IRDAI public disclosure FY’18-’19)
  • Choose between the mode of premium payment as per your comfort (you can either go for a one-time payment or opt for annual, half-yearly, quarterly or monthly payments)

Buying term insurance with ROP benefit from Max Life insurance company is quick and hassle-free. You can opt for the term plan with ROP variant while purchasing the Smart Term Plan. Here are a few hallmarks of our life insurance plans:

  • Multiple channels for a seamless buying experience
  • No bulky paperwork while buying or paying a premium for policies
  • Dedicated claim settlement officer to make the claim process effortless
  • Multiple premium payment channels, including net banking, digital wallet, credit cards, and debit cards
  • Here is the breakdown of our buying process:

Step 1: Select your policy term, and the sum assured

The first step is to use the online life insurance calculator to calculate the premium for the desired sum assured and tenure of the term plan.

Note: The ideal benefit amount for your life insurance plan should be 10 to 15 times your annual take-away income.

Step 2: Choose Riders

The next step will be to choose add-on benefits, in the form of riders over and above the base cover. These additional benefits enhance your financial protection in case of unfortunate events such as a disability or being diagnosed with a life-threatening health condition. These optional benefits are available on payment of additional premium.

You can choose from the following rider options:

* Critical illness cover that offers to cover up to 40 illnesses

* Accidental death and disability benefit

* Premium waiver benefit, applicable in case of diagnosis of critical health condition or disability

Step 3: Payment of Premium

After selecting the plan and its benefits, you can proceed to complete filing of personal information and pay the premium. You will need to fill out the following information and make the payment:

* Income, education, and profession details

* Nominee details

* Present Address (where the medical test will take place)

You have the option to pay the premium online using net banking, debit or credit card

Step 4: Fill out the Proposal Form

Essentially, the proposal form is a detailed version of your application form, which focuses on the information related to your life such as your lifestyle habits (such as smoking and drinking) and medical history (including that of your parents)

Step 5: Medical Tests

In some cases, based on individual life-risk, a medical test may be proposed. Any such medical evaluation will be conducted after the successful completion of the proposal form and document submission.  

Return Of Premium option with MWPA

According to the Section 6 of the Married Women's Property Act (or MWPA), 1874, if a married person purchases any insurance policy, on his own life and endorses it under MWPA (in favour of his spouse and children), no other person (insured’s parents, friends or relatives) will have any right to the insurance plan benefits.

The insured himself will also not have any claim to the survival benefits of the policy if he survives the plan term. Overall, if you choose to purchase a term plan with TROP benefit and endorse it under MWPA, making your wife or children the beneficiaries, you will entitle them to both the sum assured (in case of your death) and the survival benefits/refund of premiums (in case you survive the policy term).

Return of Premium Option And Surrender Value

When you purchase a term plan with return of premium option and decide to discontinue paying the premium under the plan or surrenders the policy, you will receive a Surrender Value of the policy.

The surrender value of the TROP plan is subject to the below-mentioned criteria:

  • For Single Premium variant: After payment of single premium
  • For Limited Pay variant and Regular Pay variant: On payment of two full years’ premium, where the Premium Payment Term is less than 10 years
  • On payment of three full years’ premium, where the Premium Payment Term is 10 years or more
  • The surrender value is the higher of Guaranteed Surrender Value (GSV) or Special Surrender Value (SSV)

Here the Guaranteed Surrender Value is calculated by the following formula: 

GSV factor x (Total premiums paid for base policy including extra premium (if any) but excluding modal extra and any applicable taxes, cesses or levies)

‘Total premiums paid for base policy’ refers to the total annualized premium paid under the policy including premiums for Life Stage Add on Sum Assured (if any)

The GSV Factors are as follows:

Policy Year

% of Total Annualised Premiums Paid

Single Pay variant

Limited and Regular Pay variant

1

70%

NIL

2

70%

For Premium Payment Term less than 10 years: 30%

For Premium Payment Term of 10 years or more: NIL

3

70%

30%

4

90%

50%

5

90%

52%

6

90%

54%

7

90%

56%

8 +

90%

Graduating linearly from 56% to 90% during the last two policy years

Minimum (56% + [(34% x (N-7)) /(Policy Term - 8)], 90%)

N : Year of Surrender

 

Applicable for all variants

  • Surrender Benefit (or Early Exit Value) is only applicable for base death benefit cover and not on add-on options such as Accelerated Critical Illness Benefit option or Accident Cover option.
  • Surrender Benefit (or Early Exit Value) will be payable only after the policy has acquired a Surrender Value (or Early Exit Value)

Live Life to The Max

When it comes to insurance and investment, all of us are on the lookout for instruments that can provide a significant life cover and return on investment (ROI). There is nothing wrong in doing so because all we want to secure financial future along with maximizing our savings and productively use them to create wealth.

Nevertheless, we must understand that ROI should not be the only criteria to look for a sound investment tool. When it comes to life insurance; therefore, ROI does hold importance, but not always. 

Therefore, to stay protected both physically and financially, you need to take appropriate steps early on in your lives. Exercise daily, eat healthier meals, spend time with your family, and keep your mind stress-free. On the financial front, you may choose to explore a term insurance plan with ROP optional benefit (on payment of additional payment), which will help you make sure that your family’s dreams and aspirations are protected financially against any eventualities.

**Total premiums paid inclusive of any extra premium but exclusive of all applicable taxes, cesses or levies and modal extra

* Assumed annual premium and rounded off; exclusive of taxes, modal extra and premium paid towards additional/optional or rider benefits

^ Tax applicable as per the taxation laws of the current financial year

^^the sample amount has been taken from the Smart Term Plan product brochure  for Life Cover Variant

Tax benefits On Term Plan with Return of Premium Option

Term insurance plan with ROP offers tax benefits as per the prevailing tax laws. Thus, the premium paid towards the policy and the benefit amount drawn is tax-free under Section 80C and 10(10D) respectively of the Income Tax Act, 1961.

Therefore, you can avail a tax deduction up to Rs. 1.5 lakh on the premium invested in the term plan with return of premium. Overall, if you are conservative policyholder, you can use the premium paid towards the term plan to reduce your tax liability considerably.

Return of Premium Option with Limited Pay

Max Life Insurance offers several premium paying tenures under its Term Insurance Plan with ROP optional benefit. Under the Max Life Smart Term Plan; you can choose from the following premium payment tenures:

  • Single Pay (you pay the entire premium amount payable as a lump sum in one go)
  • Regular Pay (you pay the premium amount throughout the term plan tenure either annually, half-yearly, quarterly or monthly)
  • Pay till 60 (you pay the premium till the age of 60 years while the plan coverage extends up to 85 years of age)
  • Limited Pay (you pay the premium for a fixed number of instalments, i.e., 5 Pay, 10 Pay, 12 Pay or 15 Pay)

Why Choose Max Life

Here are some of the numbers which speak about our accomplishments

Why Choose Max Life

Here are some of the numbers which speak about our accomplishments
Claims Paid Percentage

98.74%

98.74%

(Source : Annual Results Release FY18-19)

Max Life Presence

239 Offices

239 Offices

(Source : Annual Results Release FY18-19)

Sum Assured

₹7,03,972 Cr.

₹7,03,972 Cr.

In force (individual) (Source : Public disclosure FY18-19)

Assets Under Management

₹62,798 Cr.

₹62,798 Cr.

(Source : Public disclosure FY18-19)

More reasons why our customers choose us

Let’s Connect

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