Return of Premium Life Insurance

Term life insurance is easier to understand than other types of life insurance. With term life insurance, you purchase it, and your loved ones get a lump sum payment called a death benefit, should you pass on during the policy's term (time frame that it's active). Many people are hesitant about term life because if they don't die during the policy's term, they think that they have wasted the money spent on the policy's monthly premiums.

A return of premium life insurance policy is a great option for many people because it literally refunds the amount of the premiums paid over the course of the policy's term time frame. That relieves the feeling of wasting money that is sometimes associated with term life. But because ROP life insurance costs more, and because you might be giving up better financial outcome if that additional money spent on ROP life insurance was invested, means you should consider if it's right for your current situation.

What is return of premium life insurance?

Return of premium life insurance is a type of term life insurance. Term life insurance lasts for a set time frame and expires at the end of that time frame. But with return of premium life insurance you get the possibility to your money back when the policy expires if you're still living.

ROP Example

  1. Return of premium life insurance is purchased for a set term—usually 10, 20 or 30 years. It's often called a “rider” or add-on to a regular term life policy.
  2. Monthly or annual payments (premiums) are made to keep the policy in active.
  3. A predetermined lump sum cash payment called a “death benefit” will be paid to the beneficiaries listed in the policy should the policyholder die during the policy's term. The premiums' cost depends on the amount of the death benefit payment listed in the policy. Larger payout amounts cost more.
  4. 100% of the premiums paid over the life span of the policy are refunded tax-free to the policyholder when the policy expires.

Example- $70 a month is paid for a 20-year term, $16,800 is paid.back when the policy expires if the policyholder is still living.

Average Cost of Return of Premium Life Insurance

ROP life insurance comes with a “money back guarantee” so it costs more than typical term life insurance.

ROP life insurance may be 30% higher than basic term life insurance.