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Term Insurance Opportunity Cost

Pure term + invest vs return-of-premium plans, compounded.

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Verdict

Pure term + invest wins

₹67.59 L

Net opportunity cost of choosing ROP over pure term at 12% p.a.

Compounded Difference

₹81.09 L

ROP Refund (Nominal)

₹13.5 L

True Opportunity Cost

₹67.59 L

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Term Insurance Opportunity Cost — The Real Math Behind "Return of Premium"

ROP plans market themselves as risk-free: pay higher premiums, get all of it back if you survive. The catch is the time value of money. The difference between an ROP premium and a pure-term premium, compounded at even a modest equity return, almost always dwarfs the nominal refund.

Buy term, invest the difference. The death benefit is identical; the upside is everything you would have surrendered to the insurer's investment book.

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