Life Insurance Policy Where You Get Money Back

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How Does Return Premium Life Insurance Work?

With ROP term life insurance, you pay your premiums for your life insurance coverage for the duration of your policy. Usually you can choose term coverage lasting for a duration of 10, 15, 20, 25 or 30 years. 

If you outlive the policy term, the insurance company returns all the premiums you paid, less any fees or expenses. Basically, you get back almost all of the premiums you paid for your coverage.

However, premiums are much higher for this type of policy, compared to regular term life insurance with no return of premiums. 

Return premium term life insurance is a new type of term life insurance policy that provides both a death benefit and a return of premium feature within the same policy.

 

It’s Easy to Understand: If you keep your policy for the full-term period, for example 10 or 20 years, at the end of that time the life insurance company that issued the life insurance policy with the return of premium feature returns to you all of the premium that you paid for the insurance policy.

There's usually some partial return of premium for policies canceled before the end of the term (depending on the year it’s canceled – the longer it’s kept in force, the higher the amount of your return premium).

 

Return Premium Term Life Insurance is aimed at one of the biggest objections to traditional term life insurance policies: "I’m probably not going to die before my life insurance policy expires, and my money will have been wasted." 

When you buy term life insurance with a return of premium option, you don’t have to waste your money. If you outlive your policy, you get your money back as stated in the policy.

Unlike regular term life insurance policies, Return of Premium term life insurance rewards you for living by offering a guaranteed return of most of the premiums paid on the policy during the level term of the policy.

This return does not include any substandard charges (extra charges for health) and rider charges (extra benefits such as disability coverage), if any, which will be paid to the policy owner at the end of the policy period, if the life insurance policy is still in force at that time.

 

Here’s an Example: Male, age 42 with the best rate of preferred plus, $250,000 of 20-year return of premium term life insurance: Annual premium = $1,000; Return of Premium after 20 years = $20,000 ($1,000 x 20 years = $20,000) The life insurance return of premium is also income Tax Free.

You pay no income taxes on the return premium because you aren’t receiving back more money than you put into the return of premium term life insurance policy.

The return premium term life insurance policies feature fully guaranteed level premiums for the first 10, 15, 20 or 30 years and in some cases the life insurance can continue to age 95.

One major drawback of Return of Premium Term Life Insurance is the fact that this type of policy has much higher premiums than level term life insurance, which is the most popular type of term life insurance purchased.

 

Review of ROP Term Life Insurance Companies

 

Prudential ("A+" Superior rated)

Ages:  18 to 65

Duration:  15, 20 and 30 year terms

Health:  Standard or better health

Tobacco:  Smoking and non-smoking rate classes available

Coverage:  $100,000 and over face amounts of life insurance coverage

 

Assurity ("A-" Excellent rated)

Ages:  18 to 55

Duration:  20 and 30 year terms

Health:  Standard or better health, including some health issues

Tobacco:  Smoking and non-smoking rate classes available

Coverage:  $100,000 and over face amounts of life insurance coverage

  

Are You Looking for Life Insurance Protection That Returns Your Money If You Outlive Your Policy? 

Today there is coverage available that offers you a money-back life insurance plan. 

You can get cash back if you buy term insurance and outlive the duration of your coverage. 

 

Two Types of Cash-Back Life Insurance Policies

1. The Traditional Whole Life Insurance Policy that accumulates cash value within the policy. If you cancel the policy you may receive money from the value inside the policy.
2. Return of Premium Term Life Insurance offers you term insurance coverage for a specified period of time.

If you outlive the policy term, you will receive money back from the life insurance premiums you paid into the policy.

However, return premium term life insurance is more expensive upfront than regular level term life insurance plans. 

Basically, you are betting that you will be alive when your policy ends, and you’ll get back almost all of the premiums you paid for your life insurance coverage. 

But, if the worst happens and you do pass away while your term insurance is "In Force", the death benefit will be paid out to your family (beneficiary – which you select).

The reason insurers developed return of premium policies is because many people feel they are wasting their money on term insurance if they don’t die, their family gets nothing for the premiums they paid for all of those years they had life insurance. 

So, a return premium term life policy is another option for anyone who wants money back if they should be alive when their term insurance ends. 

The insurer has to charge more money upfront for return of premium policies because they invest the money and keep any interest (return) on the money you paid them. 

But, they have to return your premiums should you outlive the duration of your policy. 

The money the insurer makes on the investment of your premiums while your policy is "In Force" has to pay for the cost of insuring you, which includes processing your application, performing a medical exam, underwriting and issuing your life insurance policy, and servicing your account. 

 

Top Pick – JRC Insurance Group

JRC Insurance Group helps you shop, compare and save on life insurance. Regardless of your age or health background, we'll shop our 40+ insurance companies and find you affordable life insurance you need to protect your family and fit your budget. Compare the best life insurance rates for savings up to 73%. Get Your FREE Quote.

  

Cash back premium life insurance, also known as Return of Premium (ROP) is one of the newest types of insurance plans available.

Prior to Cash Back policies, there were only term insurance and cash value life insurance plans. 

Many consumers felt like they were throwing their money away since there was no guarantee of a beneficiary ever collecting on their life insurance policy if they outlived the duration of their term insurance.

 

What is Cash Back Life Insurance?

With a money-back life insurance policy you actually get all of the money you paid in premiums back when your policy expires. 

That means, if you do not die during the term of your insurance, you basically pay nothing toward having the life insurance in place. 

The money you sent to the insurance company (premiums) is returned to you without taking any taxes out. Basically, it serves as a sort of savings program that ensures you have a nest egg built up when your insurance policy expires.

 

Why Do Life Insurance Companies Offer Return Premium Policies?

Believe it or not insurance companies still make money from insurance policies with cash back programs. This is because they charge more for the premiums that what you would expect to pay for a term insurance policy.

Often, a cash back policy will cost from 10% up to 50% more than other regular term life policies. With this extra money, the insurance company is able to invest the cash and make money. 

Therefore, by the time your policy expires, the insurance company has made money on your money and is able to give you back the premium payments while still making a profit.

These cash back insurance programs are also a great way to build customer loyalty. With a typical term policy, the customer would need to stick with the policy for at least five years before making money off of the policy. 

By offering ROP policies, customers are more likely to stay with the company for a longer period of time.

 

Who Would Want to Purchase Return of Premium Life Insurance? 

Money-Return life insurance is a great idea for anyone that plans to keep their insurance policy for more than five years. 

In general, a thirty-year policy will cost you less than a shorter one because your funds will have more time to grow. In addition, you will be able to pay less on a policy if it is for a longer term.

For example, while a 36 year old male in good health might pay $325 for a $500,000 insurance policy, he might pay $975 per year for a thirty-year policy. 

That same policy will cost around  $1,200 for a twenty-year policy, while a fifteen-year policy will cost $1,650. 

Therefore, if you invest in an ROP life insurance policy, you should look into all of the options and determine which one will provide you with the most coverage for the lowest price – as well as which one will give you the best return in the end, should you outlive your coverage.

Just make sure to compare pricing for all of the different "term lengths" available including 10, 15, 20 and 30 years, to find out the overall cost on return of premium policies for the amount of life insurance you need.

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Life Insurance Policy Types | Term Life Insurance Explained

Life Insurance Policy Where You Get Money Back