Return of Premium Life Insurance

Home » Return of Premium Life Insurance
Return of Premium Life Insurance 2017-05-25T09:36:49+00:00
return of premium life insurance

Essentially, a return of premium life insurance policy (“ROP”) is a term insurance policy that returns the premiums made by the insured over a set period, from the life insurance carrier. For instance, if you take out a 20-year policy with “Return of Premium” clause, if you outlive the twenty year period you will get back all the money paid for the coverage. However, is “ROP” the best type of life insurance policy for you?

How does it Work

In most life insurance policies, the payments you pay don’t come back after the term of the policy runs out. However, ROP ensures that the more you have put in, the greater the working principle that will be repaid should you outlive the term of the policy. For example, if you paid $100 a month for, let’s say, 20 years (or 240 periods) you will get back $100 times 240, or $24,000.

Who Buys ROP Policies

Well-off buyers who want to take care of their loved ones financial security occasionally add a return of premium life insurance to supplement other types of insurance such as a whole life or a term insurance policy.

Those required to pay alimony must sometimes obtain term life insurance, and an ROP policy can appeal to an individual who is hesitant to purchase that insurance since there is a premium return by the end of the term.
ROP term life insurance offers a method to hedge bets regardless of happens.

Return of Premium Life Insurance is Good If

An individual’s high revenue inhibits investing in a Roth IRA and is looking for an alternative. Roth IRA income limits for 2016 begin at an adjusted gross income of $184,000 for married couples filing jointly, according to the IRS. Those who earn $194,000 or more probably won’t contribute to a Roth IRA. You possibly can buy a return-of-premium policy at any earning level. A return of premium life insurance product won’t lose its value.

Return of Premium Life Insurance is Bad If

A client chooses to make this an integral part of his or her investment approach. Although the premiums returned are tax-free, the ROP premium surcharge amount could earn more if invested somewhere else.

Make Sure You Can Pay

It’s certainly not a good idea to buy any life insurance policy if you don’t intend to keep it. Life insurance carriers are extra firm with regards to their ROP policies, so maintaining your premiums is even more crucial. That is why this type of coverage is appropriate for those who have higher incomes. There are few things as depressing as approaching the end of a twenty year ROP policy simply to have it terminated due to lack of premium payments and get nothing for your investment.

Examples of 20-year Term Policy Premiums for a Term vs Return of Premium:

Male 20-year Term

AGE$100,000$250,000$500,000$1,000,000
20$9.14$13.17$20.74$34.79
30$9.31$13.42$20.69$35.53
40$11.27$18.18$29.36$52.78
50$22.88$42.79$78.75$146.03
60$54.68$111.56$211.13$406.93
70$172.38$406.56$812.58$1553.16
80NANANANA

Male 20-year ROP

AGE$100,000$250,000$500,000$1,000,000
20$15.75$30.23$54.37$102.66
30$18.18$36.32$66.55$127.02
40$34.71$77.65$149.20$286.13
50$83.69$165.38$330.75$612.50
60$179.74$365.97$731.94$1322.13
70NANANANA
80NANANANA

Female 20-year Term

AGE$100,000$250,000$500,000$1,000,000
20$7.66$10$13.92$21.75
30$8.41$12.12$18.19$29.43
40$10.43$15.44$25.26$43.94
50$18.83$31.67$55.78$103.55
60$37.43$77.92$140.83$269.92
70$128.19$265.90$531.87$1016.72
80NANANANA

Female 20-year ROP

AGE$100,000$250,000$500,000$1,000,000
20$11.83$20.45$34.80$63.51
30$14.96$28.28$50.46$94.83
40$27.06$58.51$110.93$215.76
50$58.64$135.41$270.81$500.50
60$120.49$290.94$581.88$1089.38
70NANANANA
80NANANANA

*All rates quoted on this page are for a super-preferred healthy individual who does not use tobacco. Monthly rates are updated as of Jun 2016 and are subject to underwriting approval.*