UPDATED: Jul 8, 2020
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Return of Premium (ROP) term life combines regular term life insurance with a return of premium feature. You choose the term: 20, 25 or 30 years. At the end of the term, you get all of the premiums you paid back, as long as you made all payments and the policy didn’t lapse. It’s a money back life insurance policy. Some companies even offer partial premium return if you cancel your policy prior to the end of the term. Get your money back when you outlive your coverage with ROP term life insurance quotes. Who offers return of premium life insurance? Is it a niche product? No. Many companies offer return of premium life insurance quotes so be sure to shop around.
What’s the catch with return of premium term life insurance?
It’ll cost you more than regular term life will. Many companies offer return of premium life insurance policies. Life insurance companies charge a higher rate for ROP policies. They invest the difference and use the earnings to help pay back your premiums at the end of the policy term. So, can you get your life insurance money back? Yes. Will it cost you more? Also, yes.
How much more are we talking?
It all comes down to the interest you can earn. Remember, you’re paying more than regular term life costs. In exchange, you get all of your money back. But is that return better than the return you could earn on your own? In other words, can you do better investing that extra cost each month? Check out a Return of Premium term life insurance calculator to help you decide after you compare quotes. In some cases, it makes sense. In others, not so much.
Is Return of Premium Term Life Insurance Right for You?
Q: Is Return of Premium (ROP) term life insurance a good deal?
A: Sometimes. Depends. Only time will tell.
I’m not trying to be cute with the ambiguity here. But truth be told, this is not simply a ‘yes’ or ‘no’ question. It’s slightly more involved than that. Let’s take a look at each response.
- Sometimes – ROP term life insurance is a good option for some people, but not everyone. To say that one is better than the other in all cases is just inaccurate. Who is it good for? Well, that depends.
- Depends – There are three primary factors that determine whether ROP term or regular term is the best fit for you.
- The actual rate of return the life insurance company is offering on your policy. Remember, ROP term is simply a life insurance policy that pays you back all the premiums you paid in (or a portion if the policy is terminated early) if you do not goes toes up and there is no death benefit paid. In that sense, it’s like an investment, with the investment amount being the premium difference between ROP term and regular term. Therefore, each policy has an associated rate of return
- The second factor is the likelihood that you can achieve a comparable or better rate of return by investing the premium difference on your own.
- The third factor, and the one that most often trips up policy owners, is the likelihood you will stick to an investment plan and invest the premium difference for the duration of the policy.
- Only Time will Tell – Investment returns fluctuate over time. You really won’t know your investment return on the regular term/invest the difference yourself option until the end of the policy term. It’s somewhat of a leap-of-faith. But you will know up front what the investment return on the ROP term policy will be because the premiums will be guaranteed to remain level and the amount you will receive back will not change.
You may be surprised to see that price differential is not a primary factor in determining whether ROP term is a good deal. However, it is important to consider whether you can afford the higher premiums of the ROP term policy.
For sample comparisons and help determining rates of return on various policies, be sure to compare free ROP term life insurance quotes online.
Return of premium life insurance, or ROP life insurance, is very much like other types of life insurance. It is an agreement between you and the life insurance company. You agree to pay premiums, and the carrier agrees to pay your beneficiaries a sum of money should you die. Like all life insurance, ROP term life insurance is an excellent way to protect your loved ones and give them financial security. There is one main difference between return of premium life insurance and other types of life policies. As with all insurance plans, with a return-of-premium policy, a death benefit is paid out should you pass away. But if you live beyond the term, you get all of your money back dollar for dollar. So no matter what happens to you whether a claim is made while covered or if you outlive the policy money is distributed.
Why Should I Buy ROP Term Life Insurance?
Return of premium life insurance makes it possible to have coverage with a net cost of zero. ROP life insurance is also a safe place to put your money to receive what amounts to a modest return on your investment. Return of Premium (ROP) term life insurance combines the advantages of traditional term life insurance such as affordable, guaranteed level premium periods with a return of premium feature. At the end of the level-premium period, 100% of the premiums paid will be returned to you!
Why Shouldn’t I Get ROP Term Life Insurance?
The main reason people don’t get ROP term life insurance is that it costs more. The insurance companies that offer this product charge slightly more for it than for non-ROP term insurance. During the level-premium period, the insurance company can invest portions of the premium for capital growth. As a result, they can return your premiums to you at the end of the level-premium period.
You are paying for the convenience of securing level term life insurance with an added return on your policy premiums. Return of premium life insurance gives you the advantage of a level death benefit and level policy premiums just as a term policy does but with the added feature of return on your premiums. At the end of the level period, you select 100% of the premiums paid will be returned to you as long as you have paid your premiums throughout the period of insurance and a claim is not filed. Most people get return of premium term life insurance policies for 20 or 30 years as the comparative return on your investment will be higher the longer you have the policy.
For more information, start now with a free Return of Premium Term Life Insurance quote and compare ROP term vs regular term life insurance quotes.
Return of Premium Term Life: Could Your Life Insurance Cost You Nothing?
Term life insurance is the least expensive type of life insurance you can buy. Yet, some people shy away from it because of its temporary nature.
Term life provides coverage for a set period of time (generally 10, 15, 20, 25, or 30 years). If you die before a traditional term life policy has expired (or if you renew your policy to extend the term), your beneficiaries get a payout. If you don’t die during the term of the policy, they don’t get a payout and you don’t get any of the money back that you’ve paid in premiums.
But what makes term life insurance a viable option is that it’s flexible and extremely affordable compared to permanent life policies that come with high-priced premiums. (That’s precisely why I opted for a 20-year term policy to protect my family. While there are still mortgage payments to make and college education expenses to pay in the not-so-distant future, I feel better knowing my husband will have a financial cushion if tragically the unexpected happens to me.)
So what do you do if you need life insurance that’s cost effective but you’re not digging the idea of making premium payments that will be all for naught if you outlast the term of your policy?
Return of Premium (ROP) Term Life Insurance Pays You Back
“Return of premium” term life insurance typically provides coverage for a term of 15, 20, 25 or 30 years. If you don’t die before your policy’s term ends, the insurance company pays you back in full for the amount you’ve paid on your premiums.
The Appeal of ROP Term Life Insurance
With return of premium life insurance, you could have coverage with a net cost of zero dollars. If you pass away during the term of the policy, your beneficiaries receive a death benefit; if you outlive the policy’s term, you get all your money back. ROP term life insurance combines the advantages (affordability and guaranteed level-premium periods) of traditional term life insurance with the return of premium component.
Any Downsides to ROP Term Life?
It probably comes as no surprise that ROP term life insurance will cost more than traditional term life. Obviously, life insurance companies would need to get something in return for the guarantee that they’ll either be paying a death benefit or returning all premium costs dollar for dollar to you one day.
Also, you need to stay current with your premium payments throughout the policy term. And if you terminate your policy early, you will likely only receive a portion of the premiums you’ve paid to the insurance company.
Is Return Of Premium Term Life Right For You?
While you will probably find it more affordable than permanent life insurance, that’s not a question I can answer here. Only you can decide what will be the best choice for your peace of mind and your loved ones’ financial well-being.
Educate yourself about your options, talk with a trusted insurance professional, and ask questions so you understand the pros, cons, and costs. An ROP calculator can help you compare the cost of a traditional term life policy to that of an ROP policy.
Get started comparing return of premium life insurance quotes and regular term life insurance quotes online now!