TROP Maturity Benefit: Calculation Formula, Payout Steps and Tax Guide

You pay premiums regularly, but what if they could return to you at the end of the policy term? That’s the promise of a Term Insurance with Return of Premium (TROP) — protection, savings, and peace of mind, all rolled into one policy. Unlike traditional term insurance plans that only provide a death benefit, TROP policies work for you even if you survive the policy term.

The real highlight is the TROP maturity benefit, which is the refund of all the premiums you have paid throughout the policy term. Understanding how this return of premium maturity benefit calculation works, the steps to claim it, and the tax benefits it carries will help you make a smart, well-informed financial decision.

What is TROP Maturity Benefit?

A TROP plan combines life cover with money-back for the premiums paid^@.

Here’s how it works:

Loan Advantage

Many TROP policies allow you to take a loan during the term without greatly reducing the maturity benefit. This adds flexibility while keeping your savings intact.

TROP is particularly attractive for salaried professionals, small business owners, or anyone who wants a life cover, but doesn’t want to part with the premium amount.

TROP Maturity Benefit Calculation Formula

After understanding what the TROP maturity benefit is and how it secures your premiums, let’s see how to calculate the TROP maturity benefit in real life through a simple story.

Meet Ramesh, a 35-year-old IT professional (non-smoker). He wanted life cover for his family, but also wanted the assurance that he could get back his premiums. He opts for a 20-year TROP plan — Bandhan Life iTerm Return of Premium, with a sum assured of ₹45 lakh and an annual premium of ₹23,585 (limited pay option) and a premium payment term of 15 years.

He gets 5% discount on the first-year premium and pays ₹22,406. Second year onwards he pays ₹23,585 diligently every year for 14 years. He also takes a short-term loan against his policy due to an emergency. When he completes his policy term, he will get a maturity benefit, with the loan amount subtracted from it.

Maturity Benefit = Total Premiums Paid – Loan Amount with interest

In Ramesh’s case:

• Total premiums paid: ₹21,934 + (₹23,585 × 14) = ₹3,52,596
• Loan Amount with interest: ₹1,00,000
• Maturity Benefit: ₹2,52,596

Ramesh not only enjoyed the life cover during uncertain times but also got back his savings, making the TROP policy a “no-loss” proposition.

Steps to Claim the TROP Maturity Benefit

Claiming your TROP maturity benefit is straightforward. Here’s a step-by-step guide to ensure you receive your payout smoothly.

Step 1: Completing the Policy Term and Fulfilling All Conditions

The first and most important step is to regularly pay the premiums for the complete premium payment term. Opting for policy surrender before the term may make you ineligible to receive the maturity benefit.

Step 2: Intimation Before Maturity

Typically, the life insurance company gets in touch with you to inform you about your policy maturity. At Bandhan Life, the process begins 180 days (six months) before your policy matures.

A Bandhan Life executive will get in touch with you asking you to update your bank details.

You can either do it via iAssist (Bandhan Life’s self-service portal) or by getting in touch with the customer service team over a call or email.

Step 3: Receiving Maturity

Once your bank details are updated, your maturity amount will be credited to your bank account on the date of maturity (or the next day, if it’s a holiday).

Quick Tax Guide on TROP Maturity Benefit^%

Right about now, you may be thinking: Receiving the maturity benefit is great, but do I need to pay taxes on it? Let’s break down how TROP is treated for tax purposes, both for the maturity benefit and the premiums you pay.

Is the TROP Maturity Benefit Taxable?

The maturity benefit received under TROP is usually eligible for tax-benefit under Section 10(10D) of the Income Tax Act, subject to the conditions, which includes that the sum assured is at least ten times the annual premium.

Tax Implications on Premiums Paid

The premiums paid for TROP term insurance qualify for deductions under Section 80C of the IT Act 1961 (under OLD Tax Regime only). You can claim up to ₹1.5 lakh in a financial year as a deduction from your taxable income.

Exceptions to TROP Maturity Benefit Tax Exemption

In certain scenarios, the maturity benefit may be taxable:

• If the premium paid exceeds 10% of the sum assured
• If the policy is considered a “keyman insurance policy” for business purposes etc.

Tips for Choosing a TROP Policy

• Choose a policy term based on retirement age or long-term goals.
• Check the sum assured vs annual premium to maximise tax benefits under Section 10(10D).
• Compare insurers’ claim settlement ratios for reliability.
• Ensure digital issuance and claim options for convenience.

Recap

The TROP maturity benefit makes return of premium term insurance a popular choice for those seeking both protection and savings. To summarise:

• The benefit equals the total premiums paid, minus any deductions.
• Claiming it involves simple steps once the policy term is complete.
• The maturity amount is usually eligible for tax-benefit under Section 10(10D), and premiums paid are eligible for 80C deductions (under OLD Tax Regime only).

Frequently Asked Questions

1. How are TROP maturity benefits calculated?

The maturity benefit is calculated as the total premiums paid during the policy term minus any outstanding loans.

2. When is the maturity amount paid to the customer?

You receive the maturity payout at the end of the policy term. If it is a holiday, then it is done the day after that.