Most are aware that life insurance is essential to protecting oneself and family against financial loss. BUT some really don't like the idea of making premium payments for 10, 20, or 30 years toward a term life policy and there is never a payout. A person can feel like they put money into a policy for years and once the term is over with have "nothing" to show for it.
Fortunately, one type of life insurance policy takes that possibility right off the table. Return of premium (ROP) term life insurance refunds all of the premiums youve paid if youre still alive when the policy term is over.
How Does Return Of Premium Life Insurance Work?
With a typical term life insurance policy, you pay regular premiums during the time your coverage is in force. If you die during that time, your beneficiaries receive a life insurance payout known as the death benefit. If youre still alive when the level term period is over and you havent renewed the policy, theres no payout.
ROP life insurance allows you to get those monthly premiums back if youre still living at the end of the policy period. ROP life insurance can be purchased already integrated into a policy or added as a rider to a regular term life insurance policy, and its usually more expensive. If you outlive your coverage, 100% of the money you paid in premiums during the term is returned to you, tax-free. However, if you fail to make your payments or cancel the policy, you may not get a premium refund (exact rules vary by insurer).
Why Purchase Return Of Premium Life Insurance?
Despite a higher cost, there are some benefits to ROP term life insurance:
- Get your money back. If you outlive the policy term, the money you paid in premiums is returned back to you, meaning there is no risk of losing money. However, you lose gains you might have made by investing the money.
- Forced savings. For some, saving money may be a difficult task. It usually feels like each time we try to build our savings up, something comes along to wipe our savings account out. An ROP insurance policy works like a forced savings account, guaranteeing that youll receive a large payment in the future. Even though its cash that already belongs to younot new moneyit can be nice to know you have a chunk of savings reserved for when youre closer to retirement age.
With the best return of premium life insurance companies, you get a guaranteed amount of money back down the line that could go to your loved ones, rather than taking risks in the stock market.
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