​Who should opt for term insurance with a return of premium?

Keywords – term insurance with return of premium, term insurance

In the vast vertical of financial planning, maintaining the well-being of one’s family frequently takes precedence. Among the many alternatives available for protecting one’s financial future, term insurance policies stand out as an essential product of assurance. Specifically, term insurance with return of premium (TROP) stands out for its unique proposition: it not only provides the safety net of a term plan but also guarantees the return of the premium paid if the policyholder survives the policy period. This characteristic makes it a desirable option for people seeking both security and savings.

Significance of considering term insurance with return of premium

Choosing term insurance with premium return is like having your cake and eating it as well. It combines the simplicity and security of a term insurance with the promise of financial return, making it an important part of complete financial planning. This policy protects your loved ones in your absence while also ensuring that your investment is not ‘lost’ if the policy term exceeds your lifetime. It’s a win-win situation, providing both mental tranquillity and a safety net for the future.

Reasons to opt for term insurance with return of premium

·       Financial security for family

First of all, it provides a lump sum amount to your family if you are not around, which helps them cover the expenses.

·       Return on investment

If you live past the insurance policy term, then the overall amount of premiums you pay will be returned. It is a risk-free investment in this case.

·       Tax benefits

Payments and returns received are allowed for a tax deduction as per Section 80C and 10(10D), which makes it a very tax-efficient channel of investment.

·       Fixed premiums

Premium payments are fixed across the policy duration, so you do not have to worry about increases in costs. 

·       Flexible payout options

They provide different payment options like a lump sum or monthly income, enabling them to meet a variety of financial needs. 

·       Rider add-ons

The possibility of adding riders, for instance, critical illness or accidental death benefits increases the coverage, thus extending the protection fully.

·       Encourages savings

The premium return assurance encourages policyholders to continue paying the premium amount, which in turn supports the habit of saving.

·       Mental peace

Comprehending that your loved ones will be safe financially and that you will be refunded the premium if you outlive the term brings you immeasurable peace of mind.

·       Low risk

Being a low-risk investment option places it among those preferred by the ones who value security over high-risk, high-return investments.

·       Ease of understanding

TROP policies are simple, with clear conditions and terms that are understandable to everyone, even those with no financial skills or knowledge.

Who should avail of term insurance with a return of premium?

·       Young professionals

For professionals aged 35 and below​ who are building their careers, TROP investment is a great investment​ move. The fact that you get to start as early as in your twenties or early​ thirties has an enormous advantage—lower premiums. The insurance companies​ see the younger applicants as low-risk and offer them low premiums on insurance​ policies. Furthermore, purchasing a term plan featuring a return of premium​ at a younger age develops a habit of savings as periodic premium payments need​ to be made. By its nature, this discipline lays the groundwork for​ financial well-being. Additionally, the dual benefit of receiving the sum​ assured in case of an unfortunate event during the policy term or the return of​ the premium at the end of the policy term if the policyholder survives offers​ both security and an opportunity for savings. This approach aligns perfectly​ with the financial aspirations of young professionals who seek both protection​ and a form of forced savings that will be returned to them.

·       Primary breadwinners

Individuals who are single breadwinners in their​ families have a critical obligation to ensure financial stability for their​ loved ones in the event of their untimely death. A TROP is an excellent​ financial instrument for such individuals. It provides the mental​ tranquillity that comes with knowing that if something happens to them,​ their family will get a considerable amount of money to assist with living​ expenses, debts, education fees, and other financial commitments. Furthermore,​ if the policyholder survives the insurance term, the premiums paid throughout​ the years are refunded and can be utilised to accomplish future financial​ objectives. 

·       Conservative investors

Conservative investors seek a low-risk​ investment that is highly secure. They prefer investments that guarantee​ returns and are secure. TROP is an ideal investment instrument as it​ ensures the return of premiums will be paid if the policyholder​ lives. Thanks to this characteristic, the investor’s capital is not only​ secure but also returned, which makes it a popular choice for those who are​ reluctant to invest in highly volatile options. The added benefit of life cover during the policy term acts as a safety net, providing financial​ protection to their families in the event of their demise.

·       People with dependents

As far as individuals with​ dependents are concerned—be it children, a non-working spouse, or ageing​ parents—the financial survival of these dependents is a major concern. A​ TROP aims to ensure in the event of a policyholder’s death that the dependents​ are given a lump-sum amount, which can help them maintain their living​ standards, cover daily expenses, fund their education or settle any outstanding​ debts. This is an essential element of financial planning for everyone who​ has children. The return of premium at the end of the policy term is an​ added advantage, thus offering a financial corpus that can be used for the​ implementation of other life-centred financial goals.

ConclusionChoosing a term insurance with a return of premium means that you kill two birds with one stone as you take care of your family’s financial needs upon your demise and get your money back when the policy term ends, making it a smart option for those who want to reap the benefits of both security and savings. It serves as proof of the maxim: “Hope for the best, prepare for the worst