What is TROP ?
What is TRO ? Term insurance with return of premium, or TROP is a kind of term insurance where the policyholder gets the premium back if he survives the policy period. The other features of a TROP are similar to that of a regular term plan. A TROP doesn’t offer any benefit to the customers if they outlive the policy tenure apart from returning the premium paid. There is no maturity benefit available here. The premium is also higher for a TROP than a regular term plan. So before you opt for such a plan, do your math and see if it is worth the expense or not.
How does TROP work?
A TROP works much like a regular term plan. You buy the life insurance for a specified number of years and for a fixed sum assured. If you happen to die within this term, your nominee receives a lump sum amount of money and the policy terminates. If however you outlive the policy period, you get the premium you paid (throughout the policy) back. Certain TROP plans also return a part of your premium half way through the policy period. The insurance company would however not return any interest that may have been paid along with the premium.
For people who do not like the concept of ‘losing’ their money if they outlive the policy period, a TROP is an ideal insurance product. Term life insurance provides pure cover and doesn’t have the element of investment attached to it. As a result, when the policy comes to an end, the coverage ends and the policyholder doesn’t get anything in return. The premium paid is used up by the insurance company to compensate for the risk it undertakes to cover the life of the policyholder. If you opt for a TROP plan though, you will get all the money you paid over the years as premium, back. This is therefore an added advantage and the plan proves to be ideal for people who want their money back if they outlive the policy.
Should a TROP be taken?
A TROP plan has its advantages and disadvantages. While on one hand you end up getting your money back at the end of the policy period, you also end up paying a higher premium throughout the tenure of the policy. So you need to analyze your insurance motives. Have you bought the term plan for pure protection or simply as an added cover? If your sole motive is to protect your family against your death and not look for anything in return, go for a simple term plan. If however, you have other plans and are buying the term plan for added cover, you could opt for a TROP.