Many people who shop for life insurance prefer the rates of term life as opposed to whole life. However some view the money as a waste if they are young and expect to outlive the coverage. Return of premium life insurance or ROP life insurance allows them an alternative, a return of all their premiums if they outlive the coverage.
Return of Premium Term Life Insurance is a concept where if you outlive your term life policy the insurance carrier returns all of your premiums paid in. Traditional term life is the most cost effective way to purchase life insurance. Cash Value insurance, on the other hand, means paying higher premiums as the contract pays at death. Return of Premium or ROP somewhat splits the two in the middle.
ROP typically costs 25-50% more than a traditional term life insurance policy. The key is to have your agent evaluate the rate of return on the extra premium cost for the ROP policy. For example, a healthy 35 year old male can purchase one million dollars of coverage on a level premium 30 year guarantee for about $830 per year. The ROP premium for the same is $1440. So you are paying an extra $610 per year for Return of all your premiums paid in if you outlive the term. Well, what is your rate of return re paying $610 per year for a return of $1440 x 30 years or $43200. It is 5.08% net.
In any case, this is not a bad solution if it can fit into your budget. Return of all premiums paid in are not taxable as it is a return of your principal. Consider consulting an agent that has the product savvy and software to present the facts to help you make a prudent decision. Get knowledgable quotes and comparisons from the site below.