Return of Premium
A return of premium life insurance policy is a type of term life insurance, meaning it lasts a set period of time and then expires. Unlike traditional term life insurance, however, the insurer refunds your premiums at the end of the term.
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Because a return of premium life insurance comes with a “money-back guarantee” if you outlive the policy, it’s more expensive than typical term life insurance. The average cost of return of premium life insurance is usually about two to three times higher than a basic term policy.
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Return of premium (ROP) life insurance is added on to a standard term life insurance policy as a rider and lasts for the term of your policy — usually a 10, 20, or 30 year term.
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You make monthly or annual payments, called premiums, to keep the policy active.
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If you die while the policy is active, a pre-set cash payment called a death benefit is paid out to the beneficiaries named in your policy. The larger the amount of coverage, the more the premiums will cost.
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If the you outlive the term, 100% of the premiums paid over the course of the policy are refunded tax-free to you at the end of the term.
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Depending on the insurer, if you stop making premium payments or cancel your life insurance policy, you may not get your premiums back.
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The ROP is gaining popularity and demand. The insurance companies are adding the ROP feature into the other insurance products such as Term Life insurance, Guarantee Universal Life (GUL) insurance, Indexed Universal Life (IUL) insurance.
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