If you’re looking for life insurance that provides a refund of premiums, you’ll want to consider a return of premium (ROP) life insurance rider. By adding this rider to your term life policy, you’ll make monthly payments to keep your policy active. If you’re still alive when the policy term ends, your insurer will pay you back some or all of the money you spent on payments as an ROP benefit. However, missed payments can disqualify you from getting your ROP benefit.
|Policy Term||30 years|
|Monthly Payment Eligible for ROP Benefit||$50|
|Total ROP Benefit||$18,000 ($50 x 360 monthly payments)|
It’s important to note that the refund may not include fees and other riders you have on the policy, and it may be taxable if there’s a gain. Therefore, it’s best to consult a financial advisor to understand the potential tax implications. But, if you die during the policy term, your beneficiaries can claim the death benefit just like with any other life insurance policy.
It’s important to note that you’re only entitled to getting your term life insurance money back if you purchased an ROP rider with your term policy, you made your payments on time, and you’re still alive when the term ends. An ROP rider typically refunds you the total premium you paid for your base policy and the ROP rider, but it may not refund fees or the premium you paid for other riders on your policy. Being late on payments may reduce your refund or disqualify you from receiving one at all.
Therefore, ROP riders are typically for risk-averse individuals who want financial protection for their loved ones. It provides added security when purchasing life insurance. Plus, depending on your policy term length, your return of premium could line up with your retirement age, providing a benefit around the time you stop earning an income.
Even if you don’t fit that profile, it’s still possible to find value in an ROP rider. If you’re considering life insurance with an ROP rider, speak with a financial advisor about the potential trade-offs and tax implications for your situation.
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