A return-of-premium (TROP) term plan charges a higher premium than a plain term plan and pays every rupee of it back if the policyholder survives the term. Marketed as “insurance that costs nothing,” it’s really two products bundled together - the same mortality cover a pure term plan sells, plus a separate, self-funded savings scheme hiding inside the extra premium.
Unbundle it with real numbers. A 30-year-old buying ₹1 crore of cover for 30 years:
- Pure term plan: roughly ₹10,000 a year.
- TROP plan, same cover, same term: roughly ₹27,000 a year.
- The extra ₹17,000 a year is the actual investment - the cost of buying back, at maturity, the full ₹8,10,000 paid in premiums over 30 years.
Solved Out, the Savings Leg Returns About 3%
Solve for the rate that extra ₹17,000 a year needs to earn to grow into ₹8,10,000 after 30 years, and the answer is about 3.0%. That’s the entire “you get your money back” benefit, expressed as what it actually is: a 30-year, illiquid savings instrument returning roughly 3% a year, below a savings account and well below what even a conservative debt fund has delivered over the same kind of horizon.
The Cover Is Priced Identically Either Way
The mortality cover itself is priced identically either way - a TROP plan isn’t cheaper insurance, and the base ₹10,000 a year is money that buys protection and nothing else, in both versions. The entire difference between the two products is a fixed-return investment charged at a rate most investors would reject outright if it were offered to them on its own, without the word “insurance” attached to it.
Unbundle before comparing. Buy the term cover on its own and direct the difference wherever you would ordinarily invest it - the embedded savings leg is a thirty-year illiquid instrument at roughly 3%, which most investors would decline outright if it were offered without the word insurance attached.
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