What is the Return of Premium Rider?

What is Return of Premium rider in Term Insurance? The Return of Premium (ROP) rider is an optional add-on in term insurance that refunds all your base premiums if you survive the policy term. However, this refund excludes GST, rider charges, and additional costs. It’s only applicable if the policyholder outlives the full coverage period. For example: Let’s say Sagar, 25, buys a ₹2 crore term plan with Return of Premium (ROP) rider till age 60. He pays around ₹15,000–₹20,000 annually. If Sunil survives till 60, he’ll get a refund of all base premiums paid but without GST and extra rider costs. While the idea of getting your money back sounds appealing, ROP riders come with higher premiums and limited financial value. In most cases, the cost outweighs the benefit, making basic term plans a better choice for pure protection.

Recently, one of our advisors was guiding a client through the nuances of term insurance. After evaluating his financial details, health habits (yes, smoking included), and dependents, we were ready to use our free calculator to find his ideal cover. That’s when he asked: “If I survive the policy term and die at, say, 71, won’t all the premiums I paid go to waste?”

Honestly, it’s a valid doubt. And that’s usually when we talk about the Return of Premium Rider.

It sounds straightforward. You get your money back if you outlive the plan. But like most things in insurance, the devil’s in the details. There are conditions, added costs, and fine print that can make it less rewarding than it seems.

That’s why, at Ditto, we rarely recommend it. In this blog, we’ll break it all down to how the rider works, its pros and cons, and whether it actually makes sense for you.

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Should You Opt for a Term Insurance Policy with a Return of Premium Rider?

Term insurance is primarily designed to offer financial protection during a fixed tenure. If the policyholder passes away during this period, the sum assured is paid to the nominee serving as income replacement. While traditional plans don’t offer survival benefits, the Return of Premium (ROP) rider breaks the mould by refunding your base premiums (excluding GST and other rider costs) if you outlive the policy.

Term plans are already popular for their affordability and high coverage, with room for add-ons like ROP. But is it worth it?

Pros of Return of Premium Riders

These riders offer a unique blend of protection and reassurance, combining traditional coverage with a potential return of premiums if conditions are met.

1. Guaranteed Payout: One of the biggest draws of ROP riders is the assurance of getting something back. If the policyholder survives the term, they receive a refund of the base premiums paid. And if they don’t, the nominee still gets the full death benefit, so either way, there's a financial outcome.
2. Tax Benefits: ROP payouts are not just reassuring. They’re tax-efficient too. Under Sec 10(10D) of the Income Tax Act, the refunded premiums qualify for tax exemption, making this rider more attractive for those seeking post-tenure tax-free returns.

Cons of Return of Premium Riders

While the Return of Premium rider sounds appealing on the surface, a deeper look reveals several limitations that impact its overall value especially for cost-conscious buyers.

1. Higher Premiums: While the idea of getting your money back sounds great, it comes at a cost. ROP riders significantly increase the overall premium often defeating the affordability factor that makes term plans popular in the first place.
2. Stringent Conditions: The refund isn’t automatic. Insurers attach a set of eligibility conditions to qualify for the payout, and missing even one may disqualify you. This makes the rider less accessible than it initially appears.
3. Inflation Risk: The refund amount doesn’t consider inflation. So while you get your premiums back, their real value may have diminished over time, reducing the long-term financial impact of the payout.
4. Risk of Lower Coverage: Because ROP riders spike premiums, policyholders often reduce the sum assured to keep costs manageable. But this undermines the primary role of term insurance providing adequate financial protection for your loved ones in your absence.

While the ROP rider sounds attractive, its cost and conditions make it less compelling compared to alternatives. Riders like Waiver of Premium, Critical Illness, and Accidental Disability offer more targeted protection without inflating premiums. Choose riders that strengthen your family's financial safety net, not just the ones that promise a refund.

Our advisors once helped Anil, a 35-year-old from Pune, who was torn between a plain term plan and one with ROP. He liked the idea of getting money back. But when we showed him that the ROP version reduced his coverage by ₹50L just to stay within budget, he changed his mind.

“I’d rather leave my family with more money than get some back if I survive,” he told us, and we agreed.

At Ditto, our advisors often meet customers who choose ROP riders thinking they’re “getting something back.” But in most cases, they end up compromising on coverage, which is the very purpose of buying term insurance.

What are the Best Term Insurance Plans with a Return of Premium Riders?

Term Plan	Perks	Drawbacks
HDFC Life Click 2 Protect Super	CI cover, zero-cost exit, accidental & disability cover	Premiums on the higher side
Axis Max Life Smart Term Plan Plus	7 variants, zero-cost exit, smart cover, terminal illness, Insta payout	No life-stage/top-up options, ROP is pricey
Bajaj Allianz Life eTouch II	Multiple variants, waiver of premium, terminal illness benefit	No increasing cover, costly ROP version
Aditya Birla Sun Life Salaried Plan	Income benefit, job loss rider, ROP for salaried buyers	Limited flexibility, not for self-employed
TATA AIA Sampoorna Raksha Promise	Whole life cover, income + lump sum options, wellness discounts	Fewer payout customisations, expensive ROP version

If you're someone who wants life cover with the added reassurance of getting your money back in case nothing goes wrong, then a term plan with a Return of Premium (ROP) rider might be the right fit.

Our advisors usually say, “If you’re going for an ROP plan, make sure you’re not cutting back on your sum assured to make it affordable. That’s a trap we’ve seen far too often.”

Let’s take a closer look at some of the top options available in the market today.

1. HDFC Life Click 2 Protect Super

HDFC Life’s Click 2 Protect Super is slightly more expensive than other term insurance options but offers a comprehensive feature set. It includes a smart exit option, allowing policyholders to exit early and get back premiums under certain terms. There’s also an in-built terminal illness benefit, which pays out the sum assured if the policyholder is diagnosed with a terminal condition. The plan comes in multiple variants, offering flexibility based on your needs.

Key Benefits:

• Critical Illness Benefit (choice of 19 or 60 illnesses)
• Zero Cost Option for early exit
• Accidental Death Benefit
• Inflation Protection to enhance coverage over time
• Waiver of Premium on disability
• Total Permanent Disability Benefit
• Return of Premium option for maturity benefit

Drawbacks:

• Premiums are on the higher side compared to other ROP-enabled plans
• Too many variant options may confuse first-time buyers
• Zero-cost exit and refund conditions are strict and not available in every variant

2. Axis Max Life Smart Term Plan Plus (STPP)

Axis Max Life’s Smart Term Plan Plus is a modern, flexible term plan with seven variants, including a Return of Premium (ROP) option. It’s especially relevant for those looking for either early premium refunds, temporary cover boosts, or income payout flexibility, all backed by a brand with top-tier claim performance (99.5% CSR in FY 2023-24).

Key Benefits:

• 7 unique variants including Smart Cover, Early ROP, and Income Protection
• Return of Premium options available with both maturity and early-exit options
• Zero-Cost Exit Option: Refund of premiums after 30 policy years (with conditions)
• Waiver of Premium Plus and Critical Illness Riders available
• Smart Cover Variant: Temporary 50% boost in life cover for first 15 years
• Instant Payout, Terminal Illness, and Cover Continuance are built-in
• Discounts for women, salaried buyers, and existing Axis customers

Drawbacks:

• ROP premiums are high, often nearly 2x of regular term plans
• Critical illness rider comes with term limits and isn’t available with all pay modes
• No Voluntary Top-Up feature (unlike some competitors)

Our advisors usually say, “If you’re leaning toward ROP, STPP offers one of the most feature-rich structures. But we usually advise buyers to compare it with a base plan + investment combo because the premium gap is significant. For protection-first buyers, a basic STPP variant is far more cost-efficient.”

3. Bajaj Allianz Life eTouch II Plan

Bajaj Allianz Life’s eTouch II comes in four distinct variants: Life Shield, Shield Plus, Shield Super, and a Return of Premium (ROP) option. Depending on the variant, it provides coverage for accidental death, disability, critical illnesses, and terminal illness. It also includes a Waiver of Premium on Critical Illness, ensuring the policy continues even if you’re unable to pay due to health issues. The ROP variant reimburses your premiums if you survive the policy term.

Key Benefits:

• Four plan variants including ROP
• Accidental Death and Disability Benefits
• Waiver of Premium on Critical Illness
• Terminal Illness Benefit
• Return of Premium option

Drawbacks:

• Doesn’t offer an increasing cover variant
• Limited top-up options
• ROP version comes with significantly higher premiums and may not suit budget-conscious buyers

At Ditto, we generally avoid recommending this plan’s ROP version unless the client is extremely risk-averse and has a strong preference for return guarantees.

4.  Aditya Birla Sun Life Salaried Term Plan

Aditya Birla Sun Life’s Salaried Term Plan is specially designed for salaried professionals, offering tailored features like the Income Benefit Option, which pays the claim amount as monthly income instead of a lump sum. It includes a Critical Illness Rider, Terminal Illness Cover, and a Job Loss Support Rider that can offer relief during unemployment. The Return of Premium benefit ensures your premiums are reimbursed if you outlive the term.

Key Benefits:

• Specifically for salaried individuals
• Income Benefit Option
• Critical Illness Rider
• Terminal Illness Cover
• Job Loss Support Rider
• Return of Premium benefit

Drawbacks:

• Customisation is limited compared to peer plans
• Not available for self-employed individuals
• Lacks Whole Life or zero-cost exit options seen in other plans

5. Tata AIA Sampoorna Raksha Promise

Tata AIA’s Sampoorna Raksha Promise is the upgraded version of their flagship term plan. It offers long-term protection along with optional return of premium benefits and income payout flexibility.

This plan is particularly suitable for those seeking a whole life cover, income payouts, or a combo of lump sum + income for their nominee. You also get access to Tata’s Wellness Program, which rewards healthy lifestyle choices with discounts.

Key Benefits:

• Multiple payout options: lump sum, monthly income, or a combination
• Life Stage Benefit to increase coverage during key life events
• Whole Life Cover available up to age 100
• Waiver of Premium on Critical Illness or Accidental Total Disability
• Return of Premium option on survival
• Wellness Program offers premium discounts for healthy behavior
• Claim payout within 4 hours (conditions apply)

Drawbacks:

• ROP version significantly increases cost
• Fewer income payout customisations compared to peers like STPP
• No Smart Cover-like temporary sum boost

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Conclusion

The Return of Premium (ROP) Rider in term insurance offers a refund of base premiums excluding GST and rider charges if you survive the policy term. While it sounds appealing, this benefit comes at a higher cost and with multiple conditions, making it less attractive compared to other riders. For most policyholders, practical add-ons like Waiver of Premium, Critical Illness, or Accidental Disability provide better coverage and value.

Key Takeaways

• Refund Feature: ROP refunds only the base premiums, not including GST or other rider costs, if the insured outlives the policy.
• Higher Costs: Premiums rise significantly with ROP, and its restrictive conditions often outweigh the benefits.
• Better Alternatives: Riders like Waiver of Premium and Critical Illness offer more comprehensive and cost-effective protection.

Insurance is not just about getting something back. It’s about knowing you’ve done your best to protect those you love, no matter what. 

Frequently Asked Questions (FAQs)