Understanding TROP: Meaning, Pros & Cons | Bandhan Life

When it comes to securing your family’s future, term insurance is often the first step in financial planning. It offers pure protection—simple, affordable coverage for life’s unexpected turns. But what if you could get all your money back if nothing happens during the policy term?

That’s exactly what a Return of Premium (ROP) Term Insurance plan offers.

In this blog, we break down what this plan means, its benefits and drawbacks, and whether it’s the preferred for you.

What is Return of Premium Term Insurance?

A Return of Premium Term Insurance is a type of term plan that refunds the total premium paid by the policyholder if they survive the policy term. Unlike a standard term plan—where the premium is non-refundable—ROP offers a maturity benefit.

How does Term Insurance with Return of Premium work^@?

• You pay premiums during the premium payment term.
• If you pass away during the policy term, your nominee receives the sum assured.
• If you survive the full term, you get back all the premiums^@ you paid.

This feature combines financial protection with a savings-like benefit, making it an appealing option for many.

Let's understand this with the help of an example. 

• Mr. Sanjay, a healthy 30-year-old banker purchases Bandhan Life iTerm Return of Premium, with a ₹45 lakh life cover for 40 years, and a premium payment term of 15 years (with limited pay option). 
• In the first year, he pays an annual premium of ₹22,550. From the second year onwards, he pays ₹23,737 for the next 14 years.
• If he survives the policy term, and pays all his premiums regularly, he will get back all his premiums, amounting to ₹3,54,868at the end of the policy term. He can use this money to further strengthen his retirement fund.
• However, if Sanjay passes away at the age of 40, his family will get an insurance payout of ₹45 lakh, to deal with the financial crisis brought about by his death and the policy will terminate. 

Pros of Return of Premium Term Insurance

Premium Refund on Survival^@:

The biggest draw of ROP plans is the refund of premiums. If you outlive the term, you don’t feel like your money went to waste—you get back what you paid.

Dual Benefit of Coverage and Savings:

While the core function remains protection, ROP adds a savings element. It appeals to individuals who are hesitant to invest in pure protection plans due to the “use it or lose it” nature.

Tax Benefits^%:

Premiums paid qualify for deductions under Section 80C (under the old tax regime only), while the maturity or death benefit is eligible for tax benefits under Section 10(10D), provided conditions are met.

Ideal for Long-Term Planners:

If you're someone who commits to long-term financial goals and sees value in getting something back after disciplined contributions, ROP plans can be a solid fit.

Cons of Return of Premium Term Insurance

Higher Premiums:

Since you get your premiums back, ROP plans can be relatively expensive than standard term insurance for the same coverage.

Limited Investment Growth:

The money you get back doesn’t include any interest or investment gains. It’s not an investment tool—it’s just a refund of what you paid.

Is Return of Premium Term Insurance Worth It?

For Budget-Conscious Buyers:

If your goal is maximum coverage at minimum cost, standard term plans offer better value. You can use the cost savings to invest elsewhere.

For Those Looking to Add to their Retirement Fund:

The maturity benefit you will receive with your TROP policy, can help you bulk up your financial cushion for retirement.

Balanced Approach:

Some individuals opt for a combination—a basic term plan paired with other savings vehicles. This strategy may offer better returns and broader flexibility than an ROP alone.

Return of Premium vs Standard Term Insurance

Cost Comparison

Standard term insurance is significantly more affordable. For the same sum assured, ROP premiums are higher due to the added maturity benefit.

Benefit Comparison

Conclusion

Return of Premium Term Insurance bridges the gap between pure protection and the need for financial return. It’s suitable for those who want security with a sense of “getting something back.” If you want a safety net with a refund at the end, ROP could work for you—just make sure you understand what you’re paying for. 

Evaluate your long-term financial needs, compare plans, and don’t hesitate to speak with a financial advisor.

Check out Bandhan Life iTerm Return of Premium and get started on your journey towards financial security. 

Frequently Asked Questions

1. What happens if I cancel my Return of Premium Term Insurance policy?

If you cancel before the policy matures, you may lose out on the return benefit. Surrender charges may also apply, depending on the terms.

2. Can I change the beneficiary of my Return of Premium Term Insurance policy?

Yes, most insurance providers allow you to update or change your nominee anytime during the policy term.

3. Is Return of Premium Term Insurance more expensive than regular term insurance?

Yes, ROP plans generally cost more due to the added benefit of premium return on survival.

4. What are the tax benefits% of Return of Premium Term Insurance?

You can claim tax benefits under Section 80C (under the old tax regime only), and the Maturity or Death benefits received are eligible for tax benefit under Section 10(10D), subject to conditions.