What is a Pure Term Insurance?
Term insurance is a life insurance plan that offers financial help to your family if you pass away during the policy period. You pay a fixed amount called a premium every year, half-yearly, quarterly or monthly, for a decided time. If you pass away during the policy term, your nominee gets the death benefit. But if you out live the policy term, there is no return of premium . Pure term insurance is suitable for those who want life cover at an affordable premium .
What is Term Plan with Return of Premium (TROP)
A term plan with return of premium (TROP) works just like a pure term plan. It provides the sum assured to your family in case you pass away during the policy term. But there is one extra benefit. If you survive the policy term, you get back all the money you paid as premiums. This feature makes TROP more attractive to people who want refund of premiums . However, the premium amount for a term plan with TROP can be higher than a pure term plan. Still, it is useful for those who want both life cover and maturity benefit.
What is Whole Life Insurance?
Whole life insurance gives you life cover upto 99 or 100 years of age. As long as you keep paying your premiums, the policy stays active. The plan is helpful if you want life-long coverage and a savings option in one policy. It is often used in long-term protection .
Comparing Pure Term Plans, Return of Premium, and Whole Life Insurance
Here is a simple comparison to understand the main differences between the three options:
Feature
| Pure Term Insurance
| Term Plan with Return of Premium
| Whole Life Insurance
|
Coverage Period
| Fixed period
| Fixed period
| Lifelong (up to 99 years or whole life)
|
Premium
| Lowest
| Higher than pure term
| Highest
|
Return on Survival
| No
| Yes, the total premium is refunded if the life assured survives the policy term
| No (payout only if life assured survives term)
|
Death Benefit
| Yes
| Yes
| Yes + cash value if any(accumulates over time as per policy terms)
|
Cash Value
| No
| No
| Yes (grows over time)
|
Loan Option
| No
| No
| Yes (on cash value)
|
Best For
| Budget buyers
| Buyers who want their premium back if they outlive the policy term
| Buyers who want lifelong cover + savings
|
The term plan focusses only on providing life cover. It is best if you only want financial protection for your loved ones in your absence. TROP adds a return of premium option to your term plan. Whole life insurance is suitable for long-term wealth planning and lifelong protection.
Conclusion
When we talk about pure term insurance vs return of premium vs whole life insurance, there is no one-size-fits-all answer. Each option in a life insurance plan serves a different purpose. Pure term plans give you life coverage at a low price. Term plans with return of premium refund your premium if you outlive the policy. This gives you life cover along with a return of premiums . Whole life insurance covers you for life and helps you grow savings. Choose a plan based on your life goals, family needs, and budget.
FAQs
What is the need for a TROP if I already have a basic term insurance plan?
If you already have a pure term insurance plan, you get life cover , but no maturity benefit. But in case you outlive the policy term, a term plan with TROP gives you return of your total premiums.
Who should choose pure term insurance?
Pure term insurance is suitable for people who want high sum assured at an affordable price. There is no maturity benefit if the life assured outlives the policy term.
Why are premiums for a term plan with TROP higher than regular term insurance?
Premiums for a term plan with TROP (Return of Premium) are higher because it offers both life cover and a return of premium feature. Pure term plans gives life cover while TROP plans give life cover and refund your premiums if you survive the policy term. This added benefit makes the plan with TROP a little more expensive than a regular term plan.
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