The first job brings with it a wave of excitement, independence, and new responsibilities. As a young professional, you are now building a career and, for many, also starting to support family. This is the perfect time to build a strong financial foundation, and a key part of that is life insurance. While pure term insurance is often recommended, a growing number of young individuals are drawn to another option: the term plan with return of premium (TROP). This guide is for the beginner, breaking down what TROP is and whether it’s the right choice for your financial journey.
What is a Term Plan with Return of Premium?
At its core, a TROP is a hybrid of a pure protection plan and a savings instrument. It works just like a standard term insurance policy: in exchange for a premium, the insurer provides a high sum assured (life cover) to your family if you pass away during the policy term.
The distinguishing feature of a TROP, however, is the maturity benefit. If you, the policyholder, survive the entire policy term, the insurer refunds the total amount of premiums you have paid. This feature is particularly appealing to young professionals who may feel hesitant about “losing” their money if they outlive the policy.
Why TROP Appeals to Young Professionals
For someone in their 20s or 30s, a TROP offers a unique set of benefits that resonate with their financial mindset:
- No Money Lost: The most significant psychological benefit of a TROP is the guarantee of a refund. Knowing that your money will come back to you if you survive the policy term provides a sense of security and eliminates the “use-it-or-lose-it” concern of a pure term plan.
- Forced Savings: For those who find it challenging to save and invest consistently, a TROP acts as a disciplined savings tool. By paying the premiums regularly, you are effectively putting money aside that will be returned to you in a lump sum later in life, which can be used for a future goal like a down payment on a house or your child’s education.
- Dual-Purpose Planning: As a young professional, your financial goals are often two-fold: securing your family’s future and building your own wealth. A term plan with return of premium allows you to do both within a single product. You get the peace of mind of a high life cover, along with the assurance of a maturity benefit.
- Affordable at a Young Age: While the premiums for a TROP are higher than for a pure term plan, they are still relatively affordable for a young, healthy individual. Locking in a long-term TROP at a low rate can be a smart move, as the premium remains fixed throughout the policy tenure, protecting you from future cost increases.
The Bottom Line: Is a TROP the Right Choice?
A term plan with return of premium is a suitable option for young professionals who value the assurance of a premium refund and view it as a form of forced saving. It’s an effective way to address the emotional and psychological barriers many face when considering pure term insurance.
However, it is important to remember that the refund you receive does not include any interest. The extra premium you pay for a TROP could have been invested in a separate instrument (like a mutual fund SIP) to potentially generate a much higher return, a concept known as opportunity cost.
The choice between a pure term insurance and a TROP ultimately depends on your financial personality and goals. If you are confident in your ability to save and invest separately, a pure term plan may be more financially efficient. If you prefer the convenience and psychological comfort of a combined product that guarantees a refund, a term plan with return of premium is a strong contender.
Refresh Date: October 1, 2025
