A return of payments (ROP) life insurance policy can refund up to 100% of your payments at the end of your term.
Get up to a $500,000 policy with return of payments. A return of payments rider provides for a refund of the premium paid on a term life insurance policy if you, the policyholder doesn't die during the stated term. This effectively reduces the policyholder's net cost to zero. A policy with a return of payments provision is also referred to as return of premium life insurance.
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How Term Life Insurance and Return of Payments Riders Work
As the name implies, term life insurance provides coverage for a specified term, such as 10, 20, or 30 years. If you die during the term of your coverage, the death benefit goes to the beneficiary 0r beneficiaries you've designated in the policy.
Simple, if you outlive the term of the policy, your coverage simply ends. One advantage of term life insurance over permanent life insurance is that it is less expensive. When you buy a return of payment rider or return of premium life insurance, the insurance company will refund the premiums you've paid if you outlive the term.
The biggest benefit of return of premium life insurance is the ability to reclaim past premium payments. If you outlive your term, you are typically able to receive one lump-sum payment combining all previous premiums that were paid. This may be particularly helpful if there are any new expenditures you’ll have to cover later in life, like a mortgage or retirement plan.
In this respect, return of premium life insurance can function as a savings account with a bonus life insurance add-on. Also, any returns generated from this type of plan generally won't be taxed.
So, if the time comes, you may be able to receive your lump-sum premium payment tax-free.
Simple, if you outlive the term of the policy, your coverage simply ends. One advantage of term life insurance over permanent life insurance is that it is less expensive. When you buy a return of payment rider or return of premium life insurance, the insurance company will refund the premiums you've paid if you outlive the term.
The biggest benefit of return of premium life insurance is the ability to reclaim past premium payments. If you outlive your term, you are typically able to receive one lump-sum payment combining all previous premiums that were paid. This may be particularly helpful if there are any new expenditures you’ll have to cover later in life, like a mortgage or retirement plan.
In this respect, return of premium life insurance can function as a savings account with a bonus life insurance add-on. Also, any returns generated from this type of plan generally won't be taxed.
So, if the time comes, you may be able to receive your lump-sum premium payment tax-free.
Key benefits about Return of payments insurance policy, that can pay you back:
- You can choose an initial term of either 20 or 30 years.
- You'll pay a level premium throughout the initial 20- or 30-year policy period.
- Premiums will be returned to you at the end of the level premium policy term (20 or 30 years) assuming the death benefit has not been paid during initial policy term and all scheduled premiums have been paid.
- Return of premium insurance builds cash value, which you can borrow against during the level premium period.2
- You can continue your coverage beyond the level premium period on an annually renewable basis to age 95. Premiums will increase annually but will never exceed the maximum premium stated in the policy.
- No matter how large your death benefit, it passes to your beneficiaries generally income tax-free.