Understanding Return-of-Premium Life Insurance
Return-of-premium (ROP) life insurance policies offer a unique benefit: if you outlive the policy term, you receive a refund of the premiums you’ve paid. This type of insurance combines term life insurance with a savings component, making it an attractive option for those who want financial protection and a potential return on their insurance investment.
Key Features of ROP Life Insurance
- Provides a death benefit if you die during the term
- Refunds premiums paid if you outlive the policy term
- Typically more expensive than standard term life insurance
- Can build cash value over time
- Refunds are not taxable as income
Top ROP Life Insurance Providers
1. State Farm – Best for Earning a Discount
State Farm offers a return-of-premium term life insurance policy that can be particularly beneficial if you already have auto insurance with them, as you may be eligible for a discount on your car insurance premiums.
Policy Details:
- Policy Name: Return of Premium Term Life
- Coverage Amount: $100,000 and up
- Term Lengths: 20 or 30 years
- Additional Features: Children’s term life insurance rider, waiver of premium rider
2. Cincinnati Life – Best for Transparency
Cincinnati Life stands out for its transparency and customer service, allowing applicants to contact their underwriter directly via phone or email.
Policy Details:
- Policy Name: Termsetter ROP
- Coverage Amount: $25,000 to a flexible limit
- Term Lengths: 20, 25, or 30 years
- Additional Features: Accelerated death benefit rider, child term rider
3. Illinois Mutual – Best User-Friendly Policy
Illinois Mutual offers a straightforward return-of-premium policy with a sleek online experience for getting quotes.
Policy Details:
- Policy Name: Path Protector Plus Return of Premium Term
- Coverage Amount: $50,000 to $500,000
- Term Lengths: 20 or 30 years, or to age 65
How ROP Life Insurance Works
When you purchase an ROP life insurance policy, you select a term length. If you die during this term, your beneficiaries receive the death benefit. If you outlive the term, you receive a refund of your premiums, minus any administrative fees.
Pros and Cons of ROP Life Insurance
Pros
- Premiums are reimbursed if you outlive the policy
- Refunds are not taxed as income
- Can build cash value over time
Cons
- More expensive than regular term life insurance
- Risk of losing premium refunds if policy lapses due to late payment
Is ROP Life Insurance Worth It?
Whether ROP life insurance is worth it depends on your financial situation and goals. For most people, a standard term life insurance policy is sufficient, and the money saved on premiums could be invested elsewhere. However, for those who can afford the higher premiums and value the peace of mind that comes with knowing they’ll receive a refund if they outlive the policy, ROP life insurance can be a good choice.
Conclusion
Return-of-premium life insurance offers a unique combination of financial protection and potential savings. By understanding the key features, benefits, and drawbacks, you can make an informed decision about whether this type of insurance is right for you. Always compare quotes from multiple insurers and consider your overall financial plan before making a decision.
