Regular Term vs Return of Premium Term Insurance

Written by : Knowledge Centre Team

2025-09-27

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Life is unpredictable, and thus having a term insurance plan is not an option; it is a must to secure the future of your loved ones. It offers financial protection to your loved ones in the event of your untimely demise.

You can choose a term plan or return of premium with a term plan, depending on your needs. A term insurance plan with return of premium promises to return all the premiums you have paid till the policy matures if you survive the term without a claim. That makes a term plan with a return of premium almost a free-of-cost safety net for the family. While both provide life cover, the way they handle premiums, maturity benefits, and flexibility differs.

Let’s explore both options in detail to help you make the right choice for your financial future.

Also Read - What is Term Insurance?

Key Takeaways

Unlike regular term plans, TROP (Term Plan with Return of Premium) refunds all premiums paid if the policyholder survives the term, offering a sense of financial return and savings.
TROP comes with a higher premium compared to a regular term plan. While it costs more, it provides maturity benefits, making it ideal for those who want value and security.
Regular term plans can extend coverage up to 99 years, while TROP plans usually have a shorter term (up to 70 years), making them more suitable for mid-life planning.
Riders like critical illness and disability can be added to both types of plans.
Premiums paid under both plans are tax-deductible, but higher TROP premiums could lead to more substantial deductions under Section 80C of the Income Tax Act.

Consider while Buying a Term Insurance Plan

Term Plan vs Term Plan with ROP: Key Differences to Know

You can opt for either of the two plans. The underlying reason for buying a protection plan is the same: to secure the future of loved ones under all circumstances. However, both plans are different in a few aspects that are listed below:

Survival and Maturity Benefit: A standard term insurance plan does not offer survival benefits if you survive the policy tenure. It means you do not receive any amount from the insurance company at the end of the policy tenure.
Whereas, when you buy a term plan with a return of premium option and survive the policy tenure, you receive the total paid premium as a survival benefit.
Premium Cost and Payments: The premium for the term plan with the return of premium option is higher than the standard term life cover. The following differences may apply to the premium payment options:
1. The standard term plan offers: single, limited pay and regular pay options
2. Term plan with return of premium option: Only limited pay and regular pay options
Policy Term: You can have a standard term life cover for up to 99 years of age. However, with the return of the premium option, the policy term could be limited to 70 years.
Option to Increase Sum Assured: With a standard term insurance cover, you can increase the base sum assured at specific life stages. If you want to increase the coverage, you can submit proof of the life event and ask for an increase in the sum assured.
Usually, a term plan with a return of premium option does not allow an increase in the sum assured within the policy term. However, the iSelect Smart360 Term Plan from Canara HSBC Life Insurance allows for the same.
You can block your premium at the commencement of the policy if you feel you will need to exercise the option. This will allow you to increase your sum assured within the next five years without full underwriting.

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Additional Covers: Both standard term plans and return of premium term plans offer you additional riders to improve your coverage. Additional covers can include critical illness, accidental total and permanent disability, accidental death and child care benefits.
The return of premium option applies to the premiums you pay for the add-on riders as well. So, if you opt for these riders and survive the policy term without a claim, you will receive all the premiums, including the additional premium for the rider.
The only premium charged for added risk (a health condition or occupational hazard) will be held back by the insurer.
Tax Benefits: Tax benefits are the same under both the term plan and the return of premium term plan. The amount you pay towards a term insurance policy (or TROP) is eligible for a tax deduction. However, with TROP, you save more tax per transaction as the premium amount is on the higher side.

Learn how to save tax with a term insurance plan.

Payment of Death Benefit: You can select between different options for death benefit payment under both the term plan and the return of premium term plan. Usually, the following options are available to you:
1. Lump-Sum Payout: This is the traditional method where the entire sum assured is paid to the nominee in one go. It’s ideal when your family needs immediate access to a large amount, such as for repaying loans, funding children’s education, or managing lifestyle expenses.
2. Monthly Income Payout: Instead of a single lump sum, the death benefit is paid out as a steady monthly income over a specified period (like 10, 15, or 20 years). This option ensures that your family has a consistent flow of funds for day-to-day living expenses, making it easier to manage finances in your absence.
3. Lump-Sum + Monthly Income: A combination payout where a portion of the sum assured is paid upfront as a lump sum, and the remaining amount is distributed as monthly income over a defined term. This hybrid option offers both immediate liquidity and ongoing financial support.

Under the iSelect Smart360 Term Plan by Canara HSBC Life Insurance, you can choose to have the death benefit paid as a growing income as well.

Real-Life Illustration

Assume you buy a term insurance with the return of premium option. Since you want to get a cover of ₹1 crore, you have to pay a premium of ₹7,500 every year. Your policy tenure and premium payment tenure are 10 years, which means you have to pay ₹7500 every year for the next ten years to keep your policy active. Two cases can arise after you buy the plan:

Untimely Demise: In case of your untimely demise, the insurance company will pay your nominee a sum assured of ₹1 crore.
You survive the Policy Tenure: If you survive the policy tenure, you will receive all the premiums you paid during the 10 years. Hence, you will receive ₹75,000 at the end of 10 years.

In either case, you get something back if you buy a term insurance with a return of payment plan.

When Should You Choose TROP Over a Regular Term Plan?

A TROP plan is ideal for you if:

You are uncomfortable with the idea of “no returns” on survival
You have a steady income and can afford slightly higher premiums
You want a disciplined savings option with guaranteed returns
You’re looking for financial backup at policy maturity, possibly during retirement

A regular term plan is suitable if:

You’re seeking high-life coverage at the lowest cost
You’re younger and want long-term protection up to age 99
You’re investing elsewhere and don’t mind the absence of survival benefits

Conclusion

When it comes to term insurance, the ideal plan isn’t just about low premiums or high returns; it’s about securing your family’s future with flexibility and confidence.

So, if you prefer the affordability of a regular term plan or the value-added benefits of a return of premium plan (TROP), this plan adapts to your evolving needs. Features like sum assured upgrades for life events, customisable payout options, and critical illness riders ensure that you’re not just buying a policy; you’re investing in a lifelong safety net.

Ultimately, the right plan is the one that complements your life stage, aligns with your goals, and leaves no room for financial uncertainty. With iSelect Smart360 Term Plan by Canara HSBC Life Insurance, you don’t have to choose between practicality and peace of mind, as you get both.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.