Affordable Life Insurance Protection for Your Family

Term Life with ROP

Return premium term life insurance is a new type of 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 insurance policy for the full-term period, for example 15 or 20 years, at the end of that time the insurance company that issued the policy with the return of premium feature returns to you all of the premiums that you paid for your coverage.


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).

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


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


Unlike regular term life policies, Return of Premium policies reward you for living by offering a guaranteed return of most of the premiums you paid on the policy during the level term (duration) 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 term policy is still in force at that time.


Here’s an Example: 


Male, age 40 with the best rate of preferred plus, $300,000 of 15-year return of premium term life insurance: 


Annual premium = $1,200; Return of Premium after 15 years = $18,000 ($1,200 x 15 years = $18,000).


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 insurance policy.


The return premium term 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 insurance purchased.

 

Review of Term Life Insurance Companies with Return of Premium

 

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

 

Term Life Insurance Quotes

 

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.

 

To keep traditional life insurance policies active, you make monthly or annual payments that are not refundable. 


Return of premium life insurance (ROP) is a type of term life insurance that refunds your payments if you don’t die during the policy’s term. 


Though the refunded premiums make for an appealing coverage option, the policy comes with a catch—it’s a lot costlier than a traditional term life insurance policy. 


Because of this, return of premium life insurance isn’t recommended for most people. Instead, consider buying a traditional term life policy for your family’s financial security, and contributing money towards traditional savings or investment accounts to accrue wealth over time.

 

Key Takeaways About ROP Life Insurance


  • A limited number of life insurers offer return of premium life insurance
  • Policy costs for return of premium life insurance are two to three times higher than traditional term life plans 
  • You will see higher returns by buying traditional term life insurance and investing the difference in premium you save by not having return of premium coverage

 

What is Return of Premium Life Insurance?


A return of premium policy is a type of term insurance, meaning it lasts a set period of time (term) and then expires. Unlike traditional term life insurance, however, return of premium policies return your premiums at the end of the policy term.


How Does Return of Premium Life Insurance Work?


Return of premium life insurance is added on to a standard term life policy as a Rider and lasts for the term (duration) of your policy—usually a 10, 20, or 30 year policy term. 


Here’s How It Works:


The Policyholder makes monthly or annual payments, called Premiums, to keep the policy In Force.


If the policyholder dies while the policy is in force, a pre-set cash payment called a Death Benefit will be paid out to the Beneficiaries named in the policy. The larger the amount of coverage, the more the premiums will cost.


If the policyholder outlives the Term, 100% of the premiums paid over the course of the policy is refunded Tax-free to the policyholder at the end of the term.


Depending on the insurer, if you stop making premium payments or cancel your life insurance policy, you may not get your premiums back.


Average Cost of Return of Premium Life Insurance


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 a return of premium policy is usually about 2 to 3 times higher than a basic term life policy.


Pros and Cons of Return of Premium Life Insurance


Pros of ROP Life Insurance


For some people with specific life insurance needs, there are a few pros of a return of premium life insurance policy:

  • Costs less than whole life insurance
  • Refunded premiums that are not taxable
  • A forced savings vehicle if your premiums are returned
  • You get a guaranteed amount of money back that could go to your loved ones, rather than taking risks by investing your money in the stock market.


Cons of ROP Life Insurance


For a majority of people, the cons of a return of premium policy outweigh the pros:

  • Return of premium is 2 to 3 times more expensive than a basic term insurance policy
  • Limited number of policies available, making it more difficult to shop around for a policy that meets your specific needs
  • Savings are generally better invested elsewhere
  • Value of the money you are refunded is depreciated over time due to inflation


You may want to buy term life insurance and, instead, invest the difference. 


More often than not, you’re better off buying a cheaper, traditional term life insurance policy and investing the money you save elsewhere with a higher return and lower fees, like an IRA account.


Is Return of Premium Life Insurance Worth It?


An ROP life insurance policy may work for someone who can afford to pay extra money each month and wants a forced savings plan. 


But it’s not right for a majority of life insurance shoppers, who just need a basic term life insurance policy to protect their family, at the lowest cost possible.


Receiving a sizable chunk of money when you’re nearing retirement is nice, especially if you don’t have to pay taxes on it. 


However, because you’re really just getting the money you paid toward premiums, it’s not extra money, it’s money that was already yours. 


Also, it’s money that has lost out on years of compound interest, so it's worth less than if you had invested it, or saved the money in a traditional savings account.


While a return of premium policy offers a tax-free premium refund, the tradeoff is the upfront cost (higher premiums) and opportunity costs (missing out on better investment returns) that come with them.


Alternatives to Return of Premium Term Insurance Plans


There are other types of term life policies worth considering instead. These policies are generally more affordable.


Level Term Life Insurance: Level term is another name for traditional term life coverage. It’s the most affordable life insurance option and offers straightforward coverage. Unlike return of premium policies, it doesn’t refund your premiums at the end of the policy’s term.

 

No-Medical Exam Life Insurance: Most life insurance applications include a medical examination required to help the insurance company determine your risk of dying during the duration of your policy. A no-medical exam policy, such as an instant or accelerated underwriting policy, will allow you to skip the health exam, if you qualify for coverage.


The high costs and limited coverage options associated with return of premium plans make it a poor option for life insurance coverage. 


Instead, you may be better off protecting your family’s future financial security with a traditional term life insurance policy, and save for your future with a traditional savings and/or investment account.

Term Life Insurance Quotes

 

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.

 

 

Term Life with ROP


Disclosure: Compensated Affiliate