Term Insurance Vs Term Plan

Pure Term Insurance Vs Term Plan with Return of Premium

Having a term insurance plan is not an option - it is a must to secure the future of your loved ones. But People keep wondering which option is better to choose among the two i.e. whether to go with pure term plan or Term plan with return of premium.

Some lauded the pure term insurance for its affordability, while others praised the term plan with return of premiums for its dual benefits.

Here is a thorough comparison of Pure Term Plan and Term Plan with Return of Premium to assist you in making the right choice.

Pure Term Insurance Plan

A pure term insurance plan is the one that offers the coverage for a set and pre-decided number of years that can range from anywhere between 10 years to 30 years. It is a plan that entitles the policy holder's nominee(s) to receive the main plan benefit i.e. the sum assured in the event of the policy holder's demise during the policy term. There are no maturity proceeds however, which means that the policy holder is not entitled to receive any benefit if she/he survives the plan term. 

Term Plan with Return of Premium

A return of premium plan, on the other hand comes with the clause that enables the policy holder to receive the premiums paid by her/him towards the policy, once the term of the policy has matured. The premiums in such plans are higher those for a pure term insurance plan. This feature comes in addition to the standard death benefit offered by the insurance provider.

The needs addressed by both the products are different – for someone looking for a pure risk product for providing financial security to the family, for example, to cover loss of income or to cover a mortgage – pure term plan is suitable as the product provides high cover at low premiums. Usually, the sum assured in case of pure term products is roughly 1000 times, so the premium outlay for the customer would be very low.

Which product should you opt for?

Both products are good and have different objectives. The one you opt for would depend on your specific need.

In our Opinion, It is always good to go for a pure term insurance plan instead of buying TROP insurance.

In general, TROP plans tend to be slightly more expensive than regular term plans, with a cost that is approximately 1.8x to 2x higher. 

The return of premium may seem like an attractive option because you are being returned all the premiums you paid. But once you account for the time value of money – premiums paid during the policy term are worth more than the same premiums being returned to you at a much later date – a TROP may not seem like a great offer.

So, it may be better to go for a pure term   plan and invest the extra sum (compared to TROPS) invest in good financial avenues like mutual funds for better long-term returns.