Retirement is a golden phase in one’s life, and it is important to plan for it in advance to ensure a comfortable and financially secure future. Term insurance with return of premium (TROP) is a smart choice for building a secure retirement plan. It offers comprehensive financial protection to your loved ones in any unforeseen events while also offering the potential to get your investment back if you survive the policy term.
How does a TROP plan work?
When you purchase a TROP plan, you choose a policy term, sum assured, and premium payment frequency. The sum assured is the amount that your loved ones will receive if you pass away during the policy term. The premium is the amount you pay to the insurance company to keep your policy active.
If you pass away during the policy term, your loved ones will receive the sum assured. This can help them meet their financial obligations, such as paying off debts, covering education expenses, and maintaining their lifestyle.
If you survive the policy term, you will receive all the premiums you have paid back, minus any applicable charges. This means that you can get your investment back, even if you don’t need the life insurance cover.
Benefits of a TROP for retirement planning
A TROP plan can offer a number of benefits for retirement planning, including:
Comprehensive financial protection
A TROP plan can provide financial security to your loved ones in the event of your demise. This is especially important if you have young children or financially dependent family members.
Guaranteed returns
TROP plans offer a guaranteed return on your investment, which is especially beneficial in the current economic climate.
Tax benefits
The premiums you pay towards a TROP plan are eligible for tax deduction under Section 80C of the Income Tax Act, 1961. This means that you can reduce your taxable income and save tax.
Flexibility
TROP plans offer a great deal of flexibility in terms of policy terms, sum assured, and premium payment options. This allows you to choose a plan that best meets your individual needs and budget.
How do you choose the right TROP plan for retirement planning?
When choosing a TROP plan for retirement planning, there are a few key factors you should consider:
Policy term
The policy term should be aligned with your retirement goals and needs. For example, if you plan to retire at the age of 60, choose a policy term that covers you until the age of 80.
Sum assured
The sum assured should be sufficient to meet the financial needs of your loved ones in the event of your demise. You should consider factors such as your dependents’ monthly expenses, your liabilities, and your future financial goals.
Premium payment frequency
You can choose to pay the premiums for your TROP plan annually, semi-annually, quarterly, or monthly. Choose a payment frequency that is convenient and affordable for you.
Riders
Riders are optional add-ons that you can purchase to enhance the coverage of your TROP plan. Some common riders include accidental death benefits, critical illness benefits, and waiver of premium riders.
Insurance company
Choosing a reputable insurance company with a good track record of financial stability and claim settlement is important.
Conclusion
A term plan with a return of premium is a smart choice for building a secure retirement plan. It offers comprehensive financial protection to your loved ones if anything unexpected happens to you while also offering the potential to get your investment back if you survive the policy term. When choosing a TROP plan, it is important to consider your individual needs and goals and to compare different plans from different insurance companies to choose the best one for you.
