Refund of Premiums: How do term plans with RoP work? Should you opt for it?
A Term Insurance Plan is a more affordable option in comparison to a life insurance plan and can be purchased for a fixed period. Many term insurance plans come with the return of premium (RoP) riders. You can get the refund of premium paid after the policy period on opting for RoP rider.
The insurance companies have been bringing out innovative plans to cater to the needs of different segments of customers. While people mostly opt for life insurance plans to avail long-term protection for themselves and their families, some others also go for a term plan. A term plan might sound similar to a life insurance plan, but it is completely different.
While term insurance plans come with insurance protection for the unfortunate demise of the policy holder during the policy period, they don’t offer savings options. So, the policy holder will not receive any benefit on outliving the policy term.
However, many term insurance plans come with the return of premium (RoP) riders. You can get the refund of premium paid after the policy period on opting for RoP rider.
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What is a Term Plan?
A term plan is an insurance product that provides protection for a fixed term in exchange for a certain premium. The amount of the premium may depend on the total sum assured under the policy.
It is a more affordable option in comparison to a life insurance plan and can be purchased for a fixed period. To better understand how a term insurance plan works, it is basically a plan where you have to pay a premium for the amount you chose as the sum assured. The premium amount may be paid throughout the duration of the policy, which can range from 5-25 years.
However, the amount is only payable to the insured's family in case of his/her untimely death, as term insurance plans don't come with any maturity benefit. Those who want to receive a part of their investments can opt for the Return of Premium (RoP) rider. As a part of this, the insurer will return the entire premium paid or a part of it to the policy holder after the insurance period comes to an end.
What you should know about refunds of premium riders?
Term Insurance Plans with Return of Premium (TROP) is a new variant of life insurance that works like any other plan, except for the return of premiums feature.
In case the policyholder survives the policy term, the insurer will return all the premiums paid during the policy term, once the RoP option is chosen.