Difference Between Term Plan with Return of Premium and Money-back Policies


To make sure every individual can get an insurance policy that best suits their needs, insurance companies have released a wide array of products. When it comes to choosing between two or more insurance products, you should consider your requirement. You are going to invest your hard-earned funds towards a plan to gain financial security for the future. Two such financial products that stand out in terms of their features and offerings are term plans with return of premium and a money-back policy. Here is how you can make a choice.

What is a Term Plan with Return of Premium?

The Term Plan with Return of Premium or TROP is just like a term insurance plan, with one significant difference. A term plan does not offer any survival benefit to the policyholder;  but, in a TROP, the insurer gets the premiums paid towards the policy if they survive the term of the policy. It is an ideal insurance plan for you if you are looking for affordable life insurance that promises returns. 

A premium-return term plan is also comparatively more affordable than other insurance policies. You can also add different riders to the plan for an enhanced financial cover. One of the major benefits of a TROP is that the premiums paid towards the policy, the survival payout and the death payout are all eligible for tax benefits.

What is a Money-back Policy?

A money-back policy gives you the benefit of an online investment while being covered by an insurance plan during the policy’s tenure. This policy guarantees regular payouts and insurance cover under the same plan. Unlike a return on premium term insurance plan, where you will get maturity benefits, the money-back policy provides regular payouts before the policy ends.

These regular payouts are taken from the sum assured and will be provided to you at regular intervals. Once the policy reaches maturity, the rest of the sum assured is deposited to the policyholder. The regular payouts you receive through this plan will help you take care of different financial commitments over the years while keeping your savings intact. In the event of your unfortunate demise, the whole sum assured, along with any accrued bonuses, will be paid to your beneficiaries. 

Which One Should You Choose?

The difference between a term plan with return of premium and a money-back policy is that a TROP offers survival benefits on maturity, and the money-back policy provides regular payouts during the tenure of the policy, with the remaining sum assured being paid out on maturity. Also, between the two products available, a TROP policy provides you with the option of adding riders to your plan, and a money-back policy serves as an investment tool along with the insurance cover. 

Choosing between them will depend on your financial situation; if you already have an extra set of funds available for an emergency, getting a TROP plan can be good. However, if you need to take care of certain expenses with minimal funds to fall back on, then a money-back policy will be beneficial for you.  Choose wisely and after a thorough assessment of your financial needs. Good luck!