Common Mistakes to Avoid When Buying TROP

Thinking of buying a Term Plan with a Return of Premium (TROP) is a smart move. It’s one of those financial products that offers the best of both worlds - protection for your family and your money back if life goes to plan and you see the end of the policy term.

It is important to understand that while <TROP pl ans> are designed to be reassuring, many people unknowingly stumble into traps that can cost them more in the long run or leave them underinsured. These are common, avoidable mistakes when buying TROP that often happen because of rushed decisions, overconfidence, or simply not asking the right questions.

This blog is your roadmap to sidestep mistakes like these and make the most of your TROP policy.

Top 7 Mistakes When Buying Return of Premium Term Insurance

1. Failing to Compare Different Policies and Insurers

We get that insurance paperwork can be exhausting, and so, it is tempting to just go with the first TROP plan your agent recommends or the one that pops up on your screen. But here’s the catch: different insurers offer different premium structures, coverage benefits, riders, and claim processes. Some offer extra flexibility, like the option to convert the policy later, while others may penalise you for missing a premium. If you don’t compare, you won’t know what you’re missing.

2. Not Reviewing the Policy Terms and Conditions

Raise your hand if you’ve ever clicked “I agree” without reading the fine print. We’ve all been there. But with TROP, skipping the details can be painful later.

Every TROP policy comes with specific terms covering exclusions, waiting periods, conditions for return of premiums, and what qualifies as a valid claim. Missing even a small clause could result in a claim being denied or a lower refund than expected.

For example, some policies may not return premiums if the policyholder surrenders early, or if premiums weren’t paid consistently over the years. So, always read the product brochure and benefits illustration carefully. And don’t shy away from asking your insurer for clarification.

3. Ignoring the Long-Term Saving Aspect

TROP is not just a protection plan with a money-back guarantee. It’s a long-term financial commitment that can double up as a saving.  But many buyers focus only on the “premium return” without evaluating how the plan fits into their broader financial goals.

If you’re looking for aggressive growth or earning interest on your money, a TROP might not be your best bet. At the same time, if your priority is life cover with a 100% return of premiums, TROP can be a reliable tool in your financial toolkit. It can always add on to your financial cushion, but it cannot be a substitute for annuity, ULIPs, or savings plans in terms of returns.

Would you invest in a 20-year FD without understanding how it fits into your portfolio? No… right? The same principle applies here.

4. Not Understanding the Impact on Coverage After Partial Withdrawals or Loans

Some TROP plans allow you to take loans or even make partial withdrawals after a certain duration in the policy term. Though it sounds helpful, there’s a flip side. These transactions may reduce your final refund or affect your coverage. For instance, if you take a ₹2 lakh loan against the policy and don’t repay it in full, the unpaid amount could be deducted from the maturity payout or even impact the death benefit.

Understand what the policy allows, and more importantly, how those choices could change your benefits.

5. Failing to Plan for Inflation and Future Needs

Today’s ₹20 lakh may not be worth the same two decades from now. Yet, many buyers settle on a sum assured based on what feels “comfortable” now. Inflation slowly erodes the value of your return, which means that what seems like a decent refund now might barely cover your family’s basic needs later. Use an inflation-adjusted calculator to plan your coverage. And if your budget allows, consider layering with an additional term plan or investments that can grow over time.

6. Overlooking Tax Implications

Yes, TROP premiums qualify for tax deductions under Section 80C of the Income Tax Act (under the old tax regime). And yes, maturity proceeds can be tax-free under Section 10(10D), but only under certain conditions. Consult a financial expert to understand the details. 

7. Not Reviewing the Policy After Purchase

The coverage from your TROP policy should ideally evolve with life changes, such as marriage, kids, job changes, and health issues. You might not have the option to change the sum assured during the policy, but other aspects still need your attention.

Make it a habit to review your policy every couple of years. Are your nominee details up to date? Does the sum assured still cover your dependents? Have you considered adding a rider, like the accidental death benefit?

How to Avoid Common Mistakes When Buying TROP?

Here’s a quick cheat sheet to help you avoid those common pitfalls:

• Compare before you commit: Always review multiple plans and insurers
• Read the fine print: Understand the policy thoroughly, especially exclusions
• Think long-term: Don’t just look at the refund - align the policy with your financial goals
• Understand flexibility options: Know how loans or withdrawals affect benefits
• Account for inflation: Your coverage should grow with your life
• Be tax-aware: Don’t assume benefits are automatically tax-free
• Review and revise: Make sure the policy keeps pace with your life changes

To know which TROP policy suits your needs best, try our Term Insurance Calculator or Request a Quote Now and secure your future.

FAQs: Quick Answers to Common Queries

1. Are TROP insurance premiums refundable?

Yes, if you survive the full policy term, TROP plans return all the premiums paid (excluding taxes, rider charges, etc.). That’s the core benefit of this type of policy.

2. Can I get my insurance money back from a TROP?

Absolutely. TROP policies are designed to give your premiums back at maturity if no claims are made during the term, while still offering life cover throughout.

3. What is the term insurance with cashback at the end of the term?

That’s precisely what a TROP is - Term Insurance with Return of Premium. It gives life cover during the policy term, and if you outlive it, you get back the total premiums paid.