Agent Owner, Gilmore Insurance Services, Marysville, Washington State
What is a return of premium life insurance policy? Usually, the name return of premium life is applied to a certain term policy that does return premium applied after the specific term run is completed. These policies charge more during the level period than regular level premium term, but again, it comes back if you don't continue the policy past the period.
A Return of Premium Life Insurance policy will pay back all the premiums you paid in if you are still alive when the years of the term are ended. E.g. if you took out a $250,000 thirty year term policy on your 40th birthday with an annual premium of $500, on your 70th birthday you would get a tax free check for $15,000 (the policy may exclude paying back policy fees or other minor variations, but that is the gist of it). You could keep the cash or may even be able to roll the $15,000 over into a single premium permanent policy with a higher value.
In this example, you could have had a $250,000 term policy to cover a 30 year mortgage, and if you had passed in that 30 years, your house would have been paid off. But if you outlive the 30 year term, you still end up with a final expense fund or policy.
Return of Premium (ROP) term often will pay back part of the premiums paid in if the policy is kept for a shorter period than the entire term, as well.
The initial price for ROP Term is higher than for regular Term life insurance. And, contrary to the premiums for regular Term insurance (which are usually higher the longer the term), ROP Term policies usually cost LESS the longer the term is. That is because the insurance company hangs onto your money longer and thus is able to return more to you after those years have passed.
Owner/Licensed Insurance Agent, Fair Seas Insurance, Cleveland, Tn
Return Of Premium is a rider that is attached to a term life insurance policy. lets say you have a 20 year term life policy you pay your premiums to continue coverage. at the end of this 20 years if you do not have a return of premium policy you have paid for 20 years of coverage.
Now lets take that same 20 year policy and add the return of premium to it. Yes you will pay more in premiums but, in this case 20 years have past and you have outlived your policy your premium payments are then returned to you tax free! so now you have basically had 20 years of coverage for free.
Now you do have to consider that there may be some fees throughout the policy that may effect the total amount of the return but these are usually small changes.
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In this example, you could have had a $250,000 term policy to cover a 30 year mortgage, and if you had passed in that 30 years, your house would have been paid off. But if you outlive the 30 year term, you still end up with a final expense fund or policy.
Return of Premium (ROP) term often will pay back part of the premiums paid in if the policy is kept for a shorter period than the entire term, as well.
The initial price for ROP Term is higher than for regular Term life insurance. And, contrary to the premiums for regular Term insurance (which are usually higher the longer the term), ROP Term policies usually cost LESS the longer the term is. That is because the insurance company hangs onto your money longer and thus is able to return more to you after those years have passed.
Now lets take that same 20 year policy and add the return of premium to it. Yes you will pay more in premiums but, in this case 20 years have past and you have outlived your policy your premium payments are then returned to you tax free! so now you have basically had 20 years of coverage for free.
Now you do have to consider that there may be some fees throughout the policy that may effect the total amount of the return but these are usually small changes.