Understanding TROP: Term life insurance with a twist

When it comes to life insurance, the go-to choice for many is a pure term plan. However, the insurance landscape offers variations like Term Plans with Return of Premium (TROP), presenting policyholders with a unique proposition. 

TROP stands out from basic life insurance policies, commonly known as term plans, due to one key distinction. While a traditional term plan provides protection for a specified period, offering a payout only in case of the policyholder’s demise, TROP adds a twist.


Under TROP, if the policyholder passes away during the policy term, the family receives the death benefit, similar to a regular term plan. However, if the policyholder survives the term, the insurance company refunds the sum of all premiums (excluding taxes) paid over the policy period. This feature is known as the survival benefit, giving rise to the name ‘term plan with return of premium.’

While TROP provides both protection and a potential premium refund, it comes with higher premiums compared to standard term plans. For instance, Policybazaar.com estimates that the annual premium for a Rs 1 crore pure term cover for a 30-year-old non-smoker woman could start at around Rs 8,000, whereas a TROP premium might begin at Rs 15,000, varying by insurer.

For those seeking a cost-effective and affordable life insurance solution, investment advisors often recommend opting for a pure term plan. The return of premium in TROP may appear attractive initially, but when considering the time value of money – where premiums paid during the policy term are more valuable than those returned at a later date – a TROP may not be the most favorable option.

In the realm of life insurance, TROP adds a layer of flexibility by combining protection with the potential for premium refunds. While it may come at a higher cost, the decision between a standard term plan and TROP ultimately depends on individual preferences, risk tolerance, and the value placed on peace of mind and financial security.