TROP or Money-Back Plans? Which Is Better?

A regular term insurance plan may not be the ideal product but there are multiple types of term plans. Policyholders who want a term insurance plan that offers survival benefit along with death benefit can opt for a term insurance plan with return of premium. The biggest benefit of a term insurance with return of premium or TROP is that the policyholder gets all the premiums paid over the policy tenure back at the time of maturity.

Money back plans are life insurance cum investment plans under which the life assured gets a quarter of the entire sum at every regular interval and not a payment amount at the end of the term. These sorts of plans are best fitted to those that want to save lots of their money through insurance and at an equivalent time want to take care of liquidity throughout.

The advantages of money back plans and TROP are discussed briefly.

Benefits Of Buying Money Back Plan

Here are some benefits listed that one gets on buying a a refund plan:

• Provides Survival Benefits

As a refund plan gives the life assured a neighborhood of the sum assured at regular intervals. These payouts are known as survival benefis. Along with that regular sum, the money back plan also gives the life assured with maturity benefits as well as bonus (if any) at the time of maturity of the plan.

• Provides An Insurance Cover

Although seen as an efficient investment product, a refund plan is additionally an insurance instrument. You can choose an appropriate cover which will be wont to meet the monetary requirements of your loved ones in your absence. Such plans usher in reliability and let your relations live a dignified life even once you aren't around them.

• Risk-Free Return

These types of plans are ideally for those who do not want any form of risk in their return policy. As there's no risk involved in these plans one can freely choose a refund plan.

• Provides Tax Benefits

The premiums that are paid under this plan are free under Section 80C of the Income Act 1961. However, the cost of the premium must be less than 10% of the total sum assured of the plan. The sum assured receivable under the plan is tax-free under Section 10 (10D) of the tax Act 1961.

Benefits of Buying a Term Plan with Return of Premium

Term insurance with return of premiums offers all the benefits of a regular term insurance plan along with survival benefits. It is an ideal option for people seeking life insurance cover with assured returns. Here are three benefits of buying a term insurance plan with return of premium:

• Return of Premium Benefit

Term insurance plans do not offer any maturity benefits. However, if the policyholder outlives the policy term, they can get all the premiums back with a term insurance plan with return of premium.

• Death Benefit

Optional riders can be taken to cover accidental death, accidental disability and critical illnesses. A term insurance plan with return of premium with suitable riders provides comprehensive coverage at affordable rates.

• Tax Benefits

Investing in a term insurance with return of premium offers the policyholder the opportunity to reduce his/her tax liabilities. The premiums paid for the policy are eligible for tax deductions of up to Rs 1.5 lakh per annum under Section 80C of the Income Tax Act, 1961. The payout is exempt from income tax under Section 10 (10D) of the tax laws.

Take Away

An insurance plan gives death benefits, maturity benefits, optional death and disability benefits on purchasing. A refund back plan helps one to satisfy the need for normal flow of cash over a period of your time . Both are beneficial in their own ways. This article clearly has stated all the advantages one gets on purchasing either an insurance plan or a refund plan. 

Also read: 

How is Term Insurance Premium Calculated?

Am I Eligible To Purchase A Term Insurance Plan?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.