• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar

Compare Online Insurance Plans in India - MintWise

Term Insurance, Travel Insurance, Student Travel and Medical Insurance, Health Insurance, Cancer Insurance, Critical Illness Insurance

  • Product Quotes
    • Term Insurance
    • Health Insurance
    • Motor Insurance
    • Student Insurance
    • Critical Illness Insurance
    • Personal Accident Insurance
    • Cancer Insurance
    • Resume Application
  • Blog
  • IRDA Compliance
    • License
    • Privacy Policy
    • Terms of Use
    • Disclaimers
    • User Content Policy
    • All from Legal
  • How to choose a Term Plan
  • Term Insurance

Return of Premium Term Insurance – Why it is not worth it

  • Author

    MintWise

  • Date

    October 12, 2013

return of premium term insuranceIf you are looking for a term insurance plan, it is very likely you will bump across a variant “Return of Premium” (RoP).  It is sometimes also called “Term Return of Premium” (TRoP) or Term Insurance with Maturity Benefit, or sometimes Premium Back Term Plan.  Return of Premium Term Insurance is nothing but a term insurance plan but unlike pure term insurance, in this variant if you don’t die during the entire term of the policy, then you get all your premiums back.  But is it really as good as it sounds or is it a deceptive deal?  Let’s find out.
 
There is a simple way to find out if Return of Premium Term Insurance is worth it.
 
 

Term Insurance of   1 Crore with 55% Savings
@ just Rs. 5,728 / year*
DATE OF BIRTH
SMOKING / TOBACCO
Yes No
GENDER
Male Female
* for a healthy 25-yr old Non-smoker Male for 25 years.


 
Let’s take an example of a 32 year old non-smoker male who is looking for a life insurance cover of Rs. 50 lakhs for 25 years.  And let’s compare two real options available in the market as of today.
 
Option 1 : A Return of Premium Term Insurance Plan
 
Option 2 : A pure Term Insurance plan for the same cover + any other investment for the balance amount.
 
Refer to the table below before we begin to analyze the Options.
 
Click on the table below to view it full screen.
 
return of premium term insurance
We have used the premiums from a reputed Life Insurance company to do the comparison.  The premiums are taken from the company’s website and is based on published mortality tables.
 
Option 1 :
 


 
For a 32 year old non-smoker male with a life insurance cover of Rs. 50 lakhs for 25 years, the Return of Premium Term Insurance premium works out to be Rs. 45,700 per annum.  For 25 years, a total premium of Rs. 45,700 x 25 = Rs. 11,42,500 is paid.
 
In case death occurs, the nominee gets Rs. 50 lakhs.
 
In case of survival, i.e. death does not occur after 25 years, the total amount of Rs. 11,42,500 (net of taxes, stamp duties, etc.) are returned.  The rate of return is 0% since no additional amount comes back to you.
 
Option 2 :
 


 
The pure term insurance premium for Rs. 50 lakhs is just Rs. 6,200 per annum.  This needs to be paid for 25 years.
 
Since we want to do a like-to-like comparison, assume that the balance amount i.e. Rs. 45,700 – Rs. 6,200 = Rs. 39,500 is invested into any financial instrument of your choice, say Fixed Deposit, PPF, Mutual Fund or anything else that you are comfortable with.  And let us assume a nominal 7% return from that amount over time.
 
In case death happens, the nominee gets Rs. 50 lakhs + the value of the investment at the time of death.
 
In case of survival, the nominee does not get anything from the pure term insurance policy, but at the rate of 7% the nominee gets Rs. 30,92,815!
 
The verdict is clear – in case of both Death or Survival, Option 2 is far better!
 
You may then wonder why Return of Premium Term Insurance is then even sold – well, there are some people who ‘feel it is better’ because they are getting a ‘free life insurance’.  You have seen the numbers, it is not free at all.  In fact, they tend to lose out a huge amount of money since they don’t make use of the opportunity to make their money earn them even a nominal return.
 
So don’t fall for the lure of a return of premium term insurance plan – we are sure you can manage your money like in Option 2 above and get yourself and much much better deal!  And to make the deal even better, go for an online pure term insurance plan – it is much cheaper and allows you complete control to choose and buy, as well as the freedom to declare everything transparently before buying the most important product of your life.

[term_ins_hook_cta2]

Related Posts

  • Online-Term-Insurance-Cheap
    Online Term Plans in India – Why are they so Cheap?
  • claims-ratio-india-2014-bad-indicator
    Claims Ratio – Should you always rely on it?
  • term insurance checklist
    9 Things To Do After You Buy a Term Insurance Plan

8 thoughts on “Return of Premium Term Insurance – Why it is not worth it”

  1. Sarfaraz N says:
    August 3, 2014 at 10:12 PM

    Hi. MintWise, I got an email from a company which was promoting this kind of plan. It looked as if the life insurance was coming to me free of cost. Now I realize it is a trick. Yet another wonderful post from MintWise team. Keep writing more please.

  2. Sarfaraz N says:
    August 3, 2014 at 10:12 PM

    Hi. MintWise, I got an email from a company which was promoting this kind of plan. It looked as if the life insurance was coming to me free of cost. Now I realize it is a trick. Yet another wonderful post from MintWise team. Keep writing more please.

  3. MintWise says:
    March 31, 2014 at 9:38 PM

    Thanks, Shivendu. Yes our team is preparing the articles for Health Insurance shortly.

  4. MintWise says:
    March 31, 2014 at 9:38 PM

    Thanks, Shivendu. Yes our team is preparing the articles for Health Insurance shortly.

  5. Shivendu S says:
    March 31, 2014 at 9:36 PM

    Very nice article. Very clear and easy to understand. thanks to you. please write some articles on health insurance.

  6. Shivendu S says:
    March 31, 2014 at 9:36 PM

    Very nice article. Very clear and easy to understand. thanks to you. please write some articles on health insurance.

  7. Nivedita Sharma says:
    November 26, 2013 at 3:11 PM

    excellent explaination. some companies which are promoting return of premium term plans are fooling us.

  8. Nivedita Sharma says:
    November 26, 2013 at 3:11 PM

    excellent explaination. some companies which are promoting return of premium term plans are fooling us.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Primary Sidebar

What are you looking for?

SAVE!!!
Term Insurance
of   1 Crore - 55% Off!
@ just Rs. 5,728 / year*
DATE OF BIRTH
SMOKING / TOBACCO
Yes No
GENDER
Male Female
* for a healthy 25-yr old Non-smoker Male for 25 years.

Recent Posts

  • claim-settlement-ratio-irda-2019-2020Claim Settlement Ratio for Term Insurance by IRDA : 2020-2021
  • Family ProtectionThe Best Term Insurance Plans of 2022
  • claim-settlement-ratio-irda-2019-2020Claim Settlement Ratio for Term Insurance by IRDA : 2019-2020
  • Group Health InsuranceGroup Health Insurance (GHI) made Mandatory for Employers
  • important of term insuranceThe Importance of Term Insurance

Copyright © 2023 · Genesis Sample on Genesis Framework · WordPress · Log in

1800 2121 344

Mon - Sat: 10 AM TO 7 PM

info.mintwise@platinumone.co.in

Email Us

Live chat

Mon - Sat: 10 AM TO 7 PM

+91 86526 45424

WhatsApp 24 x 7

Insurance is the subject matter of the solicitation.

Product and related information like Claim Settlement ratios displayed on www.mintwise.com is based on the information received from the Insurers and/or as published by the IRDAI, the Insurance Regulator.

Corporate Office : PlatinumOne Insurance Broking Private Limited, Unit No. 907, 9th Floor Lodha Supremus II, Plot No. F-4 & F-4/1, Rd No.22, Wagle Estate, Thane (West), Thane 400 604, Maharashtra, India.