Understanding the ‘Term Plan’
A term plan basically refers to a life insure coverage policy that provide the risk coverage for a specified period of time. In case if the insurer dies during this time and the policy are still active, then the death benefit is paid to the nominee. It has no cash value unlike the permanent insurances. Also if the insure survives during the entire term of the plan, then in this case the policy will expire and there will no maturity benefits to be given. Now since the nature of this policy is so simple and there is no investment component in it, the insurers provide these at low premiums and when it is bought online, the premiums can cost even less.
Understanding the TROP
This is almost like the term plan in which the insurer buys the policy so the nominees can get the death benefits in case the insurer dies during the term of the plan. But what makes it different form the term plan is that in case if the insurer outlives the term of the policy, he will get back all the premiums that he paid during the plan. While in the case of the term plan if the insurer outlive the term duration no money is returned back to them. Now in the case of TROP, the premium that is paid, its duration can range from 5 years to even 25 years. It totally dependent the person who is providing the insurance, the insurer who is buying it and also the type of plan that is being offered by the insurer.
Comparison between the term plan and the TROP
Now the fact that term plan and the TROP have almost the age objective is undeniable. They provide the death benefits to the nominee of the insurer if the insurer is no more doing the tem of the plan. But the catch is when both the plan matures. This is the place where the difference between the two plans arises. By the time the maturity period comes, the behaviors of the two plans starts to completely differ from each other. This is because on one hand where the term plan pays back no money to the insure in case he outlives, in the case of the TROP, the insurer doe get money which is equivalents to all the premium he has paid or all the summation of all the interest amount that was paid by the insurer dung the active policy period.
But although the TROP looks more advantageous over the term plan, it has its own disadvantage. Now in case of the TROP, the premium that is paid on a periodic basis is usually greater than the premium that is paid for the term plans. And if in case there are any further add ones to these plans, the prices may rise even higher.
Thus the both there term insurance and the TROP come with their own set of benefits. And it depends upon the person to understand which one will suit the best according to their requirements and financial conditions.