When you think about buying a life insurance plan to safeguard yourself and your family from future uncertainties, a term insurance plan will certainly come to your mind because of its popularity and benefits. The first question that comes to our mind is how much return we will get at the end of the policy term. But term insurance plans can be of various types on which this return value depends. Among these, the most prominent ones are pure term insurance plans and term insurance with return of premium plan (TROP). Often the policy-seekers get confused between these two and cannot decide which one they should opt for. So, today we are going to talk about every detail that you need to know about these two types. Have a look at the below content.
What Do You Mean by Pure Term Insurance plan & Return of Premium plan?
A pure term plan is the most cost-effective life insurance policy that provides the nominee or the beneficiary the sum assured in case of the untimely, unfortunate demise of the life insured. This would be only payable in the case of an active policy and if the life assured dies within the policy tenure. The policy does not carry any maturity benefits or survival benefits if the life insured survives the entire policy term. It is suitable for those individuals who want to protect their families financially, even when they are not around.
On the other hand, term insurance with a return of premium plan offers a death benefit along with the return of premium, only if the life insured survives the entire policy term. The amount is equal to the total premiums paid towards the policy by the life assured. It is payable to the policyholder, and it excludes the taxes. Usually, the premium for these plans is higher than a pure term insurance policy. It is ideal for those who want returns along with coverage.
Difference Between Pure Term Insurance and Return of Premium Plan
Once you have found out the details about these two types of term insurance, have a look at the following table to get a clear idea about the differences between the two.
|Pure term insurance plan
|Term insurance with return of premium (TROP)
|Survival or maturity benefit
|No survival or maturity benefit is available with this plan.
|Survival benefit is available with this policy. It includes the total of all the premiums paid during the policy term towards the policy along with the accrued bonus if any.
|It is the most affordable term insurance plan.
|Usually, the premium for this policy is higher due to the nature of the plan.
|If you surrender this policy, the benefits and coverage of the plan will stop immediately and you will get nothing.
|In case of surrendering this policy, your policy cover will be ceased and you will get only a small fraction of the premium paid.
|Tax exemption benefits
|Premiums paid towards the policy are eligible for the tax benefits under Section 80C of the Income Tax Act. Premiums paid for the critical illness rider are eligible to get tax benefits under Section 80D. The death benefit is also tax-free under Section 10 (10D).
|Under this plan all the tax benefits mentioned under the section of the pure term insurance plan are available. Along with that, they maturity/survival benefit is also tax-free.
After going through the above content, if you ask which one is better, it would be unjustified to say in just one line because both the plans have come up with their unique purposes and benefits. Both of them cater to the varied and unique needs of the individuals. Whereas pure term is the most popular one, TROP policy gives you double benefits that are returns and coverage as well. However, it has to be remembered that in the case of the TROP policies, they tend to have a higher premium rate. so, before investing in anyone, assess and evaluate the insurance market, your financial background, your requirements, and any other possible potential factors. You can also take advice from an economic/insurance advisor.