If you’re the only earning member in your family, you know the weight of responsibility on your shoulders. One sudden twist in life and your family’s future could be at risk. That’s where term insurance comes in—a financial shield that promises to protect your loved ones.
But here’s the catch. Insurance companies now also offer something called a Return-of-Premium (ROP) Term Plan. At first glance, it looks tempting: “Pay premiums for years and get all your money back if you survive the term.” Sounds good, right? But is it really as beneficial as it looks? Let’s break it down together.
What is a Normal Term Insurance Plan?
A normal term insurance plan is pure protection. You pay a small premium, and in return, your family gets a large sum assured if something happens to you.
- Coverage: High (you can insure ₹1 crore or more at low cost)
- Premium: Low compared to other insurance products
- Maturity Benefit: None—you only get protection, no money-back
What is a Return-of-Premium (ROP) Term Plan?
The Return-of-Premium plan is basically a term plan with a twist. It promises to refund all the premiums you’ve paid if you survive the policy term.
- Coverage: Same as normal term plans
- Premium: Much higher (2.5x to 3x more expensive)
- Maturity Benefit: You get your money back—but with no interest or growth
Real-Life Example: Numbers Don’t Lie
Let’s say you’re 30 years old and buy a ₹1 crore cover for 30 years:
| Plan Type | Annual Premium | Coverage | Maturity Value |
|---|---|---|---|
| Normal Term Plan | ₹12,686 | ₹1 crore | Nil |
| Return-of-Premium Plan | ₹28,360 | ₹1 crore | ₹8.54 lakh (premium refund only) |
Why Return-of-Premium May Not Be Worth It
The refund has no interest, so inflation eats away its value. For example, ₹8.5 lakh after 30 years may feel like just ₹50,000 in today’s terms.
You could have invested the extra premium in a SIP (Systematic Investment Plan). Even a modest return of 10–12% could grow into ₹25–50 lakh or more over 30 years.
Normal term plans are flexible and let you save money for smarter investments.
Benefits of Choosing Normal Term Plans
- Low premium, high coverage
- Tax benefits under Section 80C and 10(10D)
- Extra funds can be invested in SIPs, mutual funds, or retirement plans
- Financial freedom without locking all money into one policy
