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Aditya Birla Sun Life Insurance Company Limited

Why choose a basic Term Plan over a Return-of-Premium Plan in 2026?

August 19, 2026

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Disclaimer : ABSLI Nishchit Aayush Plan (UIN No 109N137V12) is a non-linked non-participating individual savings life insurance plan.
^ Provided 0 year deferment & Annually in Advance payout frequency is chosen at the time of inception of the policy. Annually in Advance payout frequency is only available in "Annual" premium payment mode. ^*Male- 25 yrs invests in ABSLI Nishchit Aayush Plan with Level Income + Lumpsum Benefit. He chooses premium payment term 10 yrs , policy term 40 years, benefit option -Long Term Income, Sum Assured 7 times of Annualized Premium and Deferment Period 0 years. Annualized Premium is ₹1,00,000 (Exclusive of GST.). Annual Income of ₹ 32,750 (32,750*40=  13,10,000) + Maturity Benefit (₹20,00,000)= ₹ 33,10,000 ADV/3/24-25/3076.

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If you are weighing a basic Term Plan against a Return-of-Premium (ROP) Plan in 2026, the maths has shifted in your favour. Aditya Birla Sun Life Insurance (ABSLI), regulated by the Insurance Regulatory and Development Authority of India (IRDAI), offers both options, but a key reform changes the comparison. Since 22 September 2025, GST on individual Life Insurance premiums has dropped from 18% to 0%, making pure term cover cheaper than ever.

As per annual audited figures submitted to IRDAI for the year FY 25-26, ABSLI settled 98.86% of individual claims, so a low-cost pure Term Plan now buys both affordability and reliability. This guide explains why a basic Term Plan usually wins.

A basic (pure) Term Plan is the simplest, most cost-effective way to protect your family. A Return-of-Premium Plan refunds your premiums if you outlive the term but charges you significantly more for that promise. Here's how they really compare.

Pure Term vs. Return-of-Premium: 2026 comparison

Feature	Pure Term Plan	Term with Return of Premium (TROP)
Approx. annual premium*	₹9,000-12,000	₹13,000-20,000
Survival benefit	None	All premiums refunded at maturity
GST (from 22 Sep 2025)	0% (individual policy)	0% (individual policy)
Flexibility / early exit	High	Often restricted
Riders available	Wide range	Available, raises cost further

*Illustrative June 2026 rates for a healthy 30-year-old non-smoker male, ₹1 crore cover, 30-year term, regular pay premium payment term, exclusive of GST (now 0% on individual policies). Actual premiums vary by insurer, profile, and riders. Use the ABSLI Term Insurance Calculator for an exact quote.

The real cost: Why ROP's “free” refund isn't free

An ROP Plan returns the total premiums you paid, but with no interest and no adjustment for inflation. The extra premium you pay compared with a Pure Term Plan is effectively locked away without any growth, so in real terms you get back less than you put in.

Smarter approach (“Buy term, invest the difference”): Buy a low-cost pure Term Plan and invest the premium difference yourself. Over a 30-year term, that difference compounding at even 8-10% typically ends up far larger than the premiums an ROP Plan refunds.

How does the 2026 GST change affect ROP premiums?

Before 22 September 2025, individual term attracted GST at 18% on pure term plans and at the concessional rate applicable to savings-oriented plans (4.5% on first-year premiums and 2.25% on renewals) on ROP variants. From that date, GST on all individual Life Insurance premiums, including pure term and ROP, is 0%. This makes both affordable, but it especially benefits pure term buyers, since the absolute rupee saving scales with the premium and pure term frees up more money to invest. Note: group term and group credit-life policies still attract 18% GST.

Other reasons a basic Term Plan wins

Greater flexibility: Pure Term Plans let you customise cover and tenure freely. ROP Plans often have rigid terms and limited early-exit options.
No extra premium load: You pay only for protection, not for a refund feature baked into a higher premium.
Rider flexibility: Riders such as critical illness, accidental death, or waiver of premium can be added at a nominal cost to both pure term and ROP options. On a lower pure term base premium, your total outgo stays smaller.
Higher cover for the same budget: The money saved on the ROP loading can buy a larger sum assured, helping meet the ₹1 crore baseline adequacy now standard for urban earners.

ABSLI claim settlement ratio vs. leading insurers (FY 2025-26)

Whichever option you choose, claim reliability matters. As per annual audited figures submitted to IRDAI for the year FY 25-26, ABSLI settled 98.86% of individual claims along with 630+ crore total claims settled.

The ABSLI DigiShield Plan offers a pure term option as well as a return-of-premium variant, so you can compare both under one product. Explore all options on the ABSLI Term Insurance page.

Source: IRDAI and insurer public disclosures (Form L-40) for FY 2025-26. ABSLI's own disclosures report a CSR of 98.86% for FY 2025-26.

Product Disclaimer: ABSLI DigiShield Plan is a Non-Linked Non-Participating Individual Pure Risk Premium Life Insurance Plan (UIN: 109N108V13) IRDAI Approved

Conclusion

A basic Term Plan delivers the same core protection as an ROP Plan at a much lower cost, with more flexibility and the freedom to invest the difference for higher long-term returns. With 0% GST on individual premiums since September 2025 and a 98.86% individual claim settlement ratio for FY 2025-26, a Pure Term Plan such as the ABSLI DigiShield Plan is the prudent choice for most families. If your priority is protecting your family's future, keep it simple, buy pure term and invest the rest.

Product Disclaimer: ABSLI DigiShield Plan: A Non-Linked Non-Participating Individual Pure Risk Premium Life Insurance Plan (UIN: 109N108V13) IRDAI Approved

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Frequently asked questions

What is Return of Premium Term Insurance?

Return of Premium (ROP) Term Insurance is a plan that refunds all the premiums you paid if you survive the policy term. It provides the same death benefit as a pure Term Plan, plus a survival benefit. However, ROP premiums are significantly higher, and the refund carries no interest, so in real terms you get back less than you paid, making it less rewarding than investing the difference yourself.

Is a Pure Term Plan or ROP Plan better in India in 2026?

For most buyers, a Pure Term Plan is better in 2026. With GST on individual term premiums now at 0% (from 22 September 2025), pure term is affordable, more flexible, and frees up money to invest at higher returns. ROP suits only those who want a guaranteed refund and lack the discipline to invest the difference. As per IRDAI and insurer disclosures, ABSLI settled 98.86% of individual claims, so reliability is comparable across both.

Do I pay GST on a Term Insurance Return-of-Premium Plan?

No. Since 22 September 2025, GST on individual Life Insurance premiums, including Return-of-Premium Term Plans has been reduced from 18% to 0%. This means you pay only the base premium with no tax added. The exemption applies to new individual policies and renewals due on or after that date. Group policies still attract 18% GST.

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^*LI Age 21, Male, Salaried, Non Smoker, Option 1: Level Cover, PPT: Regular Pay, SA:  ₹ 1 Cr., PT: 10 years, Premium paying term: 10 years, Death Benefit Payout as Lumpsum. Annual Premium: ₹ 6900/- ( which is ₹ 575/month), 1 Cr SA is paid and the policy terminates. 
ABSLI Super Term Plan - This Policy is underwritten by Aditya Birla Sun Life Insurance Company Limited (ABSLI). This is a non-linked non-participating individual pure risk premium life insurance plan. UIN: 109N153V02