How Term Insurance with Return of Premium Works and Who Should Consider It?

What if you could protect your family and get your money back if you don’t end up needing the insurance? That’s the idea behind Term Insurance with Return of Premium (TROP). Unlike regular term insurance, which only pays out if you die during the policy term, TROP refunds all your premiums if you outlive the policy.

In this blog, we’ll explain how TROP works, who it’s best for, and why it might be a smart option if you want both coverage and a financial return.

What is Term Insurance with Return of Premium?

Term Insurance with Return of Premium is an add-on feature for some term insurance plans. If the policyholder unfortunately passes away during this term, the nominee receives the sum assured. The difference lies in what happens if the policyholder survives the term. In that case, the insurer refunds the total premiums paid, excluding taxes and rider charges.

It’s a “best of both worlds” solution for those who want protection without the fear of losing money if they live a long and healthy life.

How Does It Work?

Here’s a simple example to understand it better:
Let’s say Raj, a 30-year-old professional, buys a Term Insurance with Return of Premium policy with a 30-year term and a sum assured of ₹50 lakhs. He pays ₹15,000 per year as a premium.

Two possibilities arise:

1. If Raj passes away during the policy term: His nominee receives ₹50 lakhs.
2. If Raj survives the term: He gets back ₹4,50,000 (₹15,000 × 30), excluding taxes and rider premiums.

This structure ensures Raj’s money is not “lost,” which is a common hesitation with traditional term insurance plans.

Who Should Consider Term Insurance with Return of Premium?

While TROP may not be for everyone, it suits a certain group of individuals perfectly:

1. Cautious First-Time Buyers

If you’re buying insurance for the first time and worry about “wasting” premiums, TROP offers psychological and financial reassurance.

2. Young Professionals

Those in their 20s or 30s can benefit from lower premiums and longer policy terms, making it a smart, long-term protection strategy.

3. Family-Centric Planners

If you’re someone who wants to ensure your family is covered and see some returns at the end of the plan, TROP fits well.

4. People with Fixed Financial Goals

TROP can be a good fit if you want a refund that aligns with a major milestone, like retirement or funding your child’s higher education.

Key Benefits of Term Insurance with Return of Premium

• Maturity Benefit: Unlike regular term plans, TROP refunds the total premiums paid if you outlive the term.
• Death Benefit: Full life cover is paid to the nominee if the policyholder passes away during the term.
• Tax Savings: Premiums paid are eligible for deductions under Section 80C, and the payout (if any) is exempt under Section 10(10D).
• Customisation Options: Riders like critical illness cover and accidental death benefit can be added for enhanced protection.
• Flexible Payment Options: Choose from monthly, quarterly, half-yearly, or annual payments.

Tax Benefits

Let’s understand this with an example:
Ritika, a 35-year-old working mother, opted for a term insurance with return of premium plan with an annual premium of ₹20,000. She pays this for 25 years, amounting to ₹5 lakhs in total.

Thanks to Section 80C of the Income Tax Act, she saves ₹5,000 to ₹6,000 every year on taxes, depending on her tax slab. Over 25 years, her total tax savings alone can be nearly ₹1.25 lakhs.

Now imagine—if she had chosen regular term insurance, she’d only get a death benefit (and nothing back if she survives). But with TROP, she gets the sum assured back at maturity (after some deductions), plus she saved ₹1.25 lakhs in taxes. That’s a win-win.

Comparing TROP with Term Insurance and no TROP

Conclusion

If you’ve ever hesitated to buy term insurance because of “what if I never use it?”, then Term Insurance with Return of Premium could be your answer. It’s ideal for individuals who want to blend financial security with future savings. With flexible features, tax benefits, and the assurance of getting your money back, it brings a psychological and financial edge over traditional term plans.

Brands like Aviva Life Insurance offer customisable TROP plans designed to suit various life goals, from protecting your loved ones to building a risk-free maturity corpus. Whether you’re a young professional or a family-focused planner, this might just be the plan you’ve been looking for.

>Read How to Claim Term Insurance after Policy Holder Death?