ROP term life insurance stands for Return of Premium. When we talk of premium insurance here, it means that it is a type of policy in which the insured individual receives the total amount of all the premiums that are paid to the policy after the policy expires, given that the policy remains intact. It combines some features that are not found in a term life insurance plan; it is a set term of guaranteed level insurance and a cash value find in policy premiums that are paid to the plan.
Details of a ROP term life insurance are presented in the following example: consider a twenty-year level term policy with an annual premium of $1000. The return of premium term life insurance will give the insured with a total amount of $20,000 at the end of the twenty year term provided that the insured cost stays alive and the policy remains in force. A regular level term policy requires premiums but only have to pay out in the event of death of the insured. If in case the policy owner lives, there is no death benefit to be paid out. This can be seen as a product that pays out a benefit without taking into account the mortality outcome of the insured.
The return policy is basically found in that specific purpose but it can sometimes be an addition to a standard policy – they call it as a rider. Moreover, the premium that is returned commonly excludes any table ratings as a result of health rating.
Advantages and Disadvantages of ROP Term Life Insurance
The following are some of the benefits and drawbacks for a return of premium term life insurance:
ROP term life insurance is generally lower in terms of costs than those whole life insurance or the universal life insurance. Because of this reality, many people have chosen return of premium insurance over any other types of insurance especially when these people do not want to pay the escalating premiums of a permanent plan. On the other hand, premiums that are paid to regular term insurance usually come at 25 to 50 percent lower. However, the longer the term of the plan, the longer time the people will have to enjoy the decreasing cost of the normal terms insurance.
The extra premium that is paid by ROP term life insurance policy holders is best viewed as an additional savings vehicle that will certainly bring up a return when the maturity period of the policy is reached. Let us assume a thirty year term premium that costs an insured a thousand dollars annually and that the return of the policy is $2,000 form every year. The regular term is fifty percent cheaper but at the end of thirty years, you will receive $60,000 tax-free like what is being opposed to being out of the pocket ($30,000) on a regular term plan which can not be refunded. This way, ROP avoids “renting” term insurance.