How to Choose the Best Term Insurance Plan with Return of Premium

When planning your family’s financial security, term insurance is usually the most affordable and effective choice. Many people hesitate because they feel regular term insurance plans may not offer any value if they survive the policy term. That’s why Term Insurance with Return of Premium (TROP) appeals to so many.

A TROP plan provides the same life cover as a traditional term plan, while also refunding all your base premiums (excluding the cost of riders, fees, and taxes) at the end of the tenure if no claim is made. This makes it an attractive balance of protection and savings; you safeguard your family’s future knowing your hard-earned money will be returned. The premiums are comparatively on the higher side. Let’s see how it works!

With so many options in the market, the challenge lies in choosing the right plan that matches your goals, budget, and coverage needs. In this comprehensive guide on choosing term insurance with return of premium, we’ll break down the key factors, common mistakes, and a simple checklist to help you make the smartest choice.

Factors to Consider Before Choosing a TROP Plan

Financial Goals and Policy Tenure

When choosing term insurance with return of premium, the first step is to align your policy tenure with life goals:

• Young professionals (20s): Opt for longer terms (25–30 years) to lock in low premiums and maximise maturity benefits.
• Young Couples (30s): Match your policy term with various responsibilities, like parenthood, buying a house, etc.
• Mid-career and parents (40s): Choose a term that covers your earning years, so that by the time your policy matures, you are done with your responsibilities and your debts are cleared.

A TROP plan works best when its tenure balances short-term protection with long-term savings goals.

Premium Affordability and Refund Amount

TROP plansgenerally cost more than pure term insurance, so affordability is key. Ask yourself:

• Can I pay premiums regularly without straining my budget?
• Will I stay consistent even during income fluctuations?

Coverage (Sum Assured) and Protection Needs

Coverage should never be reduced to save on premiums. Use this thumb rule:

• Monthly expenses × 120–150 months
• Add all outstanding debts (home, car, personal loans, etc.)
• Factor in future goals like education and retirement

Aim for 10X to 15X your annual income so your family’s lifestyle and goals remain protected.

Riders and Additional Benefits

Riders make your plan more comprehensive:

• Critical Illness Rider: Covers high medical expenses
• Accidental Death Benefit: Provides an extra payout
• Waiver of Premium: Keeps your policy active in case of disability

Although rider premiums aren’t refunded, they offer valuable safety nets.

Claim Settlement Ratio and Insurer Reputation

The insurer’s reliability is as important as the product itself. Always check:

• Claim settlement ratio of 95%+
• Claim processing timelines and customer reviews
• IRDAI compliance and financial stability

A trusted insurer ensures your family receives timely support during tough times.

TROP Plan Selection Guide: Your Complete Checklist

Before finalising your term insurance with a return of premium plan, use this checklist to ensure you’re making the smartest choice for your family’s future:

The coverage matches your income and family needs: Your sum assured should be 10-15× your annual income plus outstanding debts. This ensures your family can maintain their lifestyle and meet future goals.

Premiums fit comfortably in your budget: TROP premiums are higher than regular term insurance. Choose an amount you can pay consistently for decades without financial strain.

Returns offer tax efficiency: Premiums qualify for deductions under Section 80C (old regime), while maturity benefits are typically tax-free under Section 10(10D). This makes TROP both protection and smart savings. Note that tax exemptions only apply if the sum of premiums does not exceed 10% of the sum assured.

Includes essential riders: Add critical illness cover, accidental death benefits, or premium waiver options to protect against broader life risks beyond just death.

Trusted insurer with proven track record: Select an insurer with a 95%+ claim settlement ratio and strong financial stability. Your family’s future depends on their reliability during tough times.

Policy tenure aligns with life goals: Match your term with major milestones like mortgage completion or children’s independence to maximise both protection and returns.

Following this checklist helps you identify the best term insurance with return of premium in India for your specific needs.

Learn more about our TROP plans

Mistakes to Avoid While Choosing a TROP Plan

Even the best TROP plan can let you down if chosen carelessly. Avoiding these mistakes is crucial when choosing term insurance with return of premium that truly serves your family. Here are some common errors that could put your family’s financial security at risk:

Prioritising Only Premium Refund

Many buyers focus solely on getting their money back while ignoring adequate coverage. Remember, TROP’s primary purpose is to protect your family. If your life cover is too low, the refund won’t help your dependents when they need it most. Always ensure your sum assured matches your family’s long-term financial needs first.

Choosing the Lowest Premium without Reading the Terms

The cheapest option isn’t always the smartest. Low-cost plans often hide restrictive conditions, lengthy waiting periods, or exclusions that could limit your refund or delay claims. Always review the policy terms carefully — what seems like savings today could cost your family dearly tomorrow.

Ignoring Claim Settlement Ratio

Your insurer’s claim settlement ratio reveals how reliably they honour their commitments. Companies with 95%+ratios offer peace of mind, while lower ratios put your family at risk of delays or disputes during their most vulnerable time. Never compromise on your insurer’s track record.

Frequently Asked Questions

At what age is it ideal to buy a TROP plan?

The best time to buy a TROP plan is in your 20s or early 30s. Premiums are lower when you are younger and healthier, allowing you to lock in affordable rates for long-term coverage. Delaying purchase can lead to higher premiums and stricter medical checks.

How is the premium refunded under TROP?

In a TROP plan, if you outlive the policy term, the insurer refunds all the premiums you have paid, excluding taxes and rider charges. For example, paying ₹20,000 annually for 20 years adds up to ₹4,00,000, which is returned at maturity (doesn’t include taxes, riders, or other charges).

Can riders be added to a TROP plan?

Yes, most insurers allow riders such as critical illness, accidental death benefit, waiver of premium, or terminal illness cover. These add-ons enhance protection at a small additional cost, ensuring your policy remains comprehensive.

Are TROP plans eligible for tax benefits?

Yes, premiums qualify for deductions under Section 80C of the Income Tax Act within the old tax regime, while the maturity benefit is exempt under Section 10(10D). This makes TROP plans a tax-efficient option for long-term financial security.