Although life insurance certainly has its benefits, it can be daunting to sign up for a lifetime of payments without any guarantee of payout. Return of premium life insurance is designed to return your premiums to you if you outlive your life insurance policy. You’d get everything you paid in premiums back, tax-free to use any way you’d like.
When you buy a term life insurance policy, you’re covered for life insurance for a set number of years. If you pass away during that time, your beneficiary receives your death benefit. If you outlive the set term, then the policy is typically voided (unless you choose to extend it) and you wouldn’t get anything back.
With return of premium life term insurance, if you outlive that set term then you actually get all of the premiums that you paid back to you. If you die during that period, then your beneficiary receives your death benefit like normal.
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While it might sound too good to be true, the return of premium life insurance is very real. However, you will have to pay more for this type of life insurance: It can cost as much as three times the premiums of normal life insurance.
Some of the benefits of return of premium life insurance include:
There are pros and cons to choosing the return of premium life insurance. Whether or not it’s worth it for you can depend on a number of factors such as your age, your health, the term of the policy, your financial situation, the cost of the premiums, and more.
For many, the fact that returns of premium life insurance payments don’t earn interest is a significant drawback. Some prefer to purchase a standard term life insurance policy and add funds to an investment account, which can often be more than the value of the returned payments at the end of a return of premium life insurance policy.
For others, the safety net of return of premium life insurance is well worth forfeiting any interest on the funds. Some also enjoy the forced savings vehicle that return of premium life insurance ensures and would prefer not to take investment risks in the stock market.
The right choice will vary greatly between policy holders.
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ROP (return of premium) life insurance quotes will be higher than term life insurance quotes, because it’s seen as an added benefit to receive your payments back at the end of the term. Insurance companies need to account for this potential loss by charging higher premiums throughout the term.
ROP life insurance quotes can be as much as 2-3 times the cost of traditional term life insurance. Understanding this will help you know what to expect and how to find the most cost-effective but beneficial policy for you.
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Although ROP life insurance quotes are higher than most life insurance quotes, that doesn’t mean you still can’t save money and get the best deal possible.
These tips on saving on ROP life insurance quotes can net you serious savings:
Keep in mind that if your main draw to ROP term life insurance is the forced savings vehicle, you might prefer higher premiums to build up your savings.
ROP term life insurance isn’t for everyone. It’s a special type of term life insurance that works well for those who hate the thought of paying into a policy and never seeing any benefit, or for those that want to build low-risk savings and aren’t disciplined/confident enough to do it in the investment market.
By understanding the in’s and out’s of ROP term life insurance, you can make the right decision for you, your family, and your finances.
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Insurance companies are taking a risk that you’ll outlive your policy’s term and they’ll have to pay back all the premiums you paid, which would leave them no benefit to insuring you. They charge higher premiums throughout the term to make up for this higher risk.
Margaret Huntley Margaret Huntley is a creative writing and philosophy student at Western University. She has been working as a freelance writer for over two years and has written about everything from insurance, to poker, to health and wellness for international businesses.
