Return of premium (ROP) life insurance is a type of term life insurance that allows policyholders to receive a refund of all premiums paid if they outlive the policy period. Typically, ROP life insurance is more expensive than regular term life insurance, but it can provide a cash benefit for those who don’t pass away during the coverage period. The refund amount is tax-free, but it doesn’t include interest, so policyholders essentially provide an interest-free loan to the insurer.
ROP life insurance can be purchased as an integrated feature of a policy or added as a rider to a regular term life insurance policy. However, the exact rules for a premium refund vary by insurer. If policyholders fail to make payments or cancel the policy, they may not receive a premium refund.
ROP life insurance is typically two to three times more expensive than regular term life insurance. Instead of paying extra for an ROP rider, policyholders may consider purchasing a traditional term life insurance policy and investing the extra funds in a safe investment account. This strategy can help them preserve cash and earn modest returns.
Below is a table of examples of term life insurance policies with a return of premium option:
|Insurance Company||Policy Name|
|John Hancock||Term with Vitality|
Term life insurance is generally more affordable than permanent life insurance options such as whole life and universal life insurance. Policyholders should compare policies from different insurers to find the best coverage for their needs. Forbes Advisor provides ratings of the best insurance companies and helpful information on finding the best coverage for travel, auto, home, health, life, pet, and small business insurance.
Casey Bond and Ashlee Kieler are experienced personal finance writers and editors who provide guidance on insurance options and personal finance topics.
- Waffle Insurance. What Is Return Of Premium Life Insurance?
- SelectQuote. Return Of Premium Life Insurance: Policies And Cost
- Forbes. Return Of Premium Life Insurance: What It Is & How It Works
- Sproutt. Are Return Of Premium Riders Worth It?
- Department of Labor and Human Resources. Do You Get Money Back After A Term Life Insurance?