Return of Premium Life Insurance (ROP Insurance)

You have probably heard of ROP or Return of Premium whenever life insurance is being talked about.

But what is return of premium life insurance? The ROP insurance is an additional incentive on some term life insurance policies. It acts like a money-back guarantee. If the insured passes away during the covered period, then the beneficiaries get a lump sum. However, if the insured does not die after the payment, the he lives to get back all the premiums he paid.

This benefit was added in order to counteract the notions of people that they will just waste their money because they are not going to die during the term.

Now, some people get the Term Life Insurance because it is relatively cheap and easy to comprehend, as compared to the whole life insurance. While you are paying, you are covered and your family will be benefited in case something happens to you. However, if you outlive your policy, you get nothing.

With the ROP, however, you have the assurance that if you outlive your policy, you will get something–like forced savings.

This is a reading that I got from the internet about Return of Premium Life Insurance.

Return of Premium (ROP) Term is an elegant and effective new solution that splits the problem up the middle. It starts out like Term Life Insurance with one extra promise from the insurer: If you pay your premiums and you live, we’ll give you your money back. On a typical 20 year Level Term Life Insurance policy the ROP feature could cost about 30% more, but that extra premium will effectively earn you a 6-7% return over the 20 years -– just enough to earn you back everything you’ve paid in. What’s in it for the carrier? LOYALTY. Carriers spend a lot of money to get your policy, and only start making a profit if you stick around more than five years or so. ROP guarantees that lots of customers stay for the full 20. And, for those that don’t, the carrier made an extra 30% on those guys -– and used some of it to pay you a solid return on your money. So if you know that you are going to be insured for the long haul, then think about tossing in a few extra dollars and getting it all back in the end.