Return of Premium Life Insurance
Way.com: The Better Way to Shop for Life Insurance
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Way.com: The Better Way to Shop for Life Insurance
No Medical Exams
100% Online
Get estimates in seconds
4.9/5 Rating on the App Store
Key Takeaways
If you are looking for a policy with a twist that means benefits, then the return of premium life insurance might be the one. Return of Premium (ROP) life insurance is a type of life insurance policy that refunds the premiums the policyholder pays if the policyholder outlives the policy term.
In other words, if the policyholder passes away during the policy term, the death benefit will be paid to the beneficiaries, just like a regular life insurance policy. However, if the policyholder survives the policy term, the premiums paid into the policy will be returned to the policyholder tax-free.
The added benefit of the premium refund makes ROP life insurance expensive. However, the major attraction is the double benefit of receiving the death benefit and a refund of the payment if you outlive the policy term.
This is a term life insurance policy. Therefore, you can choose the period for policy coverage, like 10,20 or 30 years. Once the period is met, you can either renew the policy or receive the money paid over the years.
This can also be collaborated with an existing policy or added as a rider. The amount you receive is tax-free.
Return of premium life insurance policy or the rider is a choice that must be made based on individual needs and financial goals. However, if you check these boxes below, you can consider buying a return premium rider.
However, suppose you find other investment alternatives that may provide a better return on your money or other policies that align with your financial goals. In that case, you may not opt for the return of a premium life insurance policy.
The cost of return of premium (ROP) life insurance can vary depending on many factors, including your age, health, gender, the amount of coverage you need, and the length of the policy term.
ROP policies are generally more expensive than traditional term life insurance policies because they offer an additional benefit (the refund of premiums if the policyholder outlives the term). They cost at least thrice the ordinary term insurance policy.
It's crucial to compare quotes from multiple insurers to find the best policy and price for your needs.
| Insurance Company | Sample Monthly Cost for Term Insurance | Policy Types | AM Best Rating | ROP Features |
|---|---|---|---|---|
| Assurity | $35 | Term, Universal (UL), Whole | A+ | 15-, 20-, and 30-year terms on ROP policies |
| Mutual of Omaha | $33 | Final Expense, Indexed Universal, Term, Universal | A+ | A terminal illness living benefit and conversion policy till the end of term |
| State Farm | $35 | Final Expense, Term, Universal (UL), Whole | A++ | ROP terms are available for 20 and 30 years |
| AAA | $34 | Final Expense, Term, Universal (UL), Whole | A+ | 15-, 20-, and 30-year terms but no riders available |
| John Hancock Life Insurance | NA | Indexed Universal (IUL), Term, Variable Universal (VUL) | A+ | ROP policies for 25- and 30-year terms. |
Here are some hacks to choose the best ROP life insurance from the insurance companies that offer the policy. Here are the factors you must consider while purchasing a return of premium life insurance.
Getting online quotes and comparing the prices from different insurance companies that provide ROP will help in deciding according to your budget and needs.
The financial strength of the company is a crucial aspect as it makes sure that there will be a fair payout.
It will be easier to handle the procedures related to payout by analyzing the general trend in the company and following the NAIC customer ratings.
Switching to a return of premium policy could be a decision you might make later in life. So, choosing a company that allows you to convert your policy will be best.
This can add to the existing policy, especially if it lacks the required feature. Therefore, make sure you purchase policies from providers that offer riders that complement the policies you plan to purchase or already have.
The return of premium policy is, without a doubt, more expensive than regular term insurance policies. However, weighing your priorities and if your budget allows you to opt for it.
If you are not planning to take out any loans, the insurance cost will be zero if you outlive the policy. However, the premium rates must be considered before finalizing the policy.
If you think the return of premium insurance is not worth it, then other permanent life insurance policies with cash value component and growth value can be considered. Similarly, the absence of interest rates makes it a less lucrative option if you view it as a source of investment.
| Pros | Cons |
|---|---|
| Refund of premiums | Expensive premium rates |
| Flexibility in terms of the length of the policy term and the amount of coverage you choose | Limited coverage |
| Refund of premiums is tax-free | Premiums you pay into an ROP policy do not earn any interest. |
| ROP policies may not be available from all insurance providers |
The life insurance rates published in this guide are based on the results of research completed by Way.com’s data team. Using a mix of public and internal data, we analyzed millions of rate averages across U.S. ZIP codes.
Quotes are typically based on a full coverage policy average unless otherwise noted within the content.
These rates were publicly sourced from insurer filings and should be used for comparative purposes only — your own quotes will differ. Given this, it’s important to go through our insurance steps form to find how much you can save with way.com
If you can afford the expensive premium rates, getting an ROP rider will give you the benefits and protection to your beneficiaries and the policy amount if you outlive the policy.
A return of premium is not default with the term life insurance. You will receive it once you purchase the rider, or the policy, pay premiums on time, and do not let it lapse and outlive the policy term. Otherwise, your beneficiaries will receive the death benefits.
Suppose you decide to secure a 20-year term life insurance policy supplemented with a return of premium (ROP) rider, where your monthly payment eligible for the ROP benefit amounts to $75. Assuming you faithfully maintain all your payments until the end of the term, you could potentially receive a significant reimbursement of $18,000 from your insurance provider. This sum is calculated by multiplying your monthly payment of $75 by the total number of payments made over the 240-month period.
With a return of premium term life insurance policy, the person who paid for the coverage would get all of the premiums back. This is considered a reimbursed cost and is not taxed in the United States.
Upon the death of the insured, this benefit pays an additional insurance amount. Upon receiving proof that the insured died while the benefit was in effect, the benefit amount will be paid to the same beneficiary and in the same manner as the money payable under the policy.
Access your digital insurance card through the app. You no longer need to carry your physical insurance card with you.
Receive reminders before your renewal. Way.com will also send new quotes from up to 45 insurance companies with your renewal reminder.
Keep everyone on your policy up to date by sharing your insurance information.
Make changes to your policy right from the app (coming soon) and ask for expert advice.
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