Premium life insurance returns give you back all or most of your premiums paid when the term expires. Understand the pros and cons of this type of coverage.
If you like the idea of taking out a life insurance policy to protect your family during the years when they need it most, but hate the idea of spending money on life insurance premium payments for 10, 15, 20 or 30 years, you may be interested in Learn more about a term life insurance product called the return of premium life insurance.
Returning premium life insurance, often called ROP life insurance, is exactly what it sounds like – a term life insurance that returns your premiums at the end of the term. Not all life insurance companies offer ROP insurance. However, if you are interested in purchasing life insurance coverage and getting back your monthly premium dollars if you are still living at the end of your ROP period, you may want to look at the return on premium insurance.
It may sound like ROP offers the best of both worlds – the ability to give your loved ones a death benefit if you die unexpectedly during your ROP period and the ability to get back some of your monthly premium payments if you are still living with your life insurance coverage ends – but there are some drawbacks. For example, a refund of premium insurance is more expensive than a regular life policy.
At present, Haven Life does not offer ROP insurance because our internal survey shows that this is not what our customer base needs or is looking for. However, this does not mean that you should not consider ROP insurance because you are comparing your life insurance options. Is a premium insurance refund worth it? It all depends on what you hope to get out of your life insurance – and what you are willing to pay for.
In this article:
What is the return on premium life insurance?
Return on premium life insurance is a type of life insurance cover that returns your premium payments if you live at the end of your coverage period. Again, ROP life insurance works just as the name suggests: as long as the insured survives the term, the insurance returns most or all of your premiums paid at the end of the term – and you do not even have to pay income tax on your case. This type of coverage can either be a stand-alone insurance or as an optional life insurance rider on a regular life insurance policy.
So why do not we hear more cruel reviews about this coverage option? Although ROP insurance may be suitable for some families, it has some drawbacks that make it one of the less popular forms of life insurance.
Advantages and Disadvantages of Premium Life Insurance Reimbursement
Here is a quick list of pros and cons associated with Premium Life Insurance Repayment:
- Get back most or all of your premiums if you survives the term and has not allowed the insurance to terminate for free
- The premium is often much higher
- No interest on the returned premiums
- If you leave your insurance due, no premiums will be returned
- Not available to everyone life insurance companies or agencies  How much does the return on premium insurance cost?
Return on primary life insurance is generally more expensive than other types of life insurance. This makes it more difficult to sell for many people, even those who are interested in ROP life insurance due to the premium benefit associated with the insurance.
How much more does a ROP insurance cost you? Let's make some comparisons. According to State Farm, a 25-year-old woman in excellent health can pay about $ 51.77 a month for a 30-year, $ 250,000 life insurance premium repayment. The same woman would pay just $ 19.90 a month for a regular life insurance policy through Haven Life. That's a difference of $ 11,473.20 in premium payments during the insurance period.
This is the big decision you will have to make when trying to choose between repaying premium life insurance and regular life insurance – or when trying to decide if you want to add a return of premium drivers to a life insurance policy. Are the higher premiums you will pay for the ROP policy worth the benefits? Or should you get the semester policy and use the money you save to build your emergency fund, contribute to your children's college education or work for another major financial goal?
How does ROP life insurance compare to a permanent life insurance policy? A refund of the premium policy, mentioned above, can cost a 25-year-old woman in excellent health about $ 51.77 per month for a 30-year insurance policy with $ 250,000 in coverage. A $ 100,000 life insurance policy from Allstate, on the other hand, starts at $ 136.68 a month – that's more than twice as much money for less than half the coverage.
Of course, permanent insurance has other benefits, which is why people are often willing to pay higher premium payments to sign up for permanent life insurance. In addition to providing lifelong coverage (as long as you keep track of your premium payments), permanent life insurance has what is called a cash value. This cash value can be taken from the policy and used to cover pension costs, home remodeling, student loans – literally whatever you want. Variable life insurance and variable universal life insurance allow you to even invest the cash value of your life insurance, so that it can grow together with the market. : the ability to do something with your premium payments, whether you save a cash value now or get your premium money back in the future. Does this mean that a refund of the premium policy is right for you? Not necessarily.
Is premium insurance return right for you?
If you are considering returning premium insurance, ask yourself the following question: are you willing to pay higher premium payments now for the potential of getting those payments back when your premium period expires? Since a ROP insurance is much more expensive than a life insurance, you need to ask yourself how much money you are willing to put into your monthly life insurance payments – and if you and your loved ones would get better served if you put the money against another financial goal.
Yes, the idea of getting some or all of your premium payments back at the end of your ROP life insurance period is attractive. This is the idea of the cash value in connection with a permanent life insurance. But remember the real purpose of life insurance: to protect the people you love by giving them a death benefit if you die while they are still dependent on your income or your financial contributions.
A term life insurance solves that problem in a way that is both simple and affordable. You can choose the exact amount of coverage you need – you may want a 20-year insurance policy to cover the family until your children graduate from college, or you may want a 30-year insurance policy to cover you and your partner until the loan is paid off. You may only need a 10-year life insurance policy because you got married later in life and plan to retire soon. You get to decide how much coverage you need and how long the coverage should be, which means that your insurance can be as cost-effective as possible.
When you sign up for premium life insurance reimbursement or when you work with a life insurance agent to create a universal life insurance policy, you add extra watches and whistles to your life insurance in exchange for higher costs. For some people, these benefits are worth it – but there are risks along the way that you may not be aware of. If you have ROP insurance and you die during your repayment of the premium term, your beneficiaries will receive the death benefit in connection with your ROP life insurance but none of your premium costs will be reimbursed. Think through all the possible scenarios before you make your decision.
Is It Right For You To Reimburse Premium Insurance? Usually people choose medically insured life insurance over a ROP insurance because the premiums are lower and they would rather have the extra money they would have paid for a ROP insurance in their pockets. But for those who want to get their premiums back and are willing to pay the higher costs, it may be a good fit.
Fortunately, there are many options when it comes to life insurance, making a good fit possible for all types of families in all kinds of situations. With a little research, you can make sure you choose the best type for your family. If you are interested in a premium policy refund, start getting some quotes and find out exactly what you can get for your money. Then get at least a traditional life insurance as a point of comparison. The best way to decide between ROP and life expectancy – or between ROP and a permanent insurance policy – is to compare the two life insurance quote side by side. Once you have the numbers and benefits in front of you, you have the information you need to determine if premium life insurance reimbursement is worth it.
Our Editorial Policy
Haven Life is a customer-centric life insurance agency supported and wholly owned by the Massachusetts Mutual Life Insurance Company (MassMutual). We believe that navigating life insurance decisions, your personal finances and your general well-being can be refreshingly easy.
Our Editorial Policy
Haven Life is a customer-centric life insurance agency that is supported and wholly owned by the Massachusetts Mutual Life Insurance Company (MassMutual). We believe that navigating life insurance decisions, your personal finances and your general well-being can be refreshingly easy.
Our content is created for educational purposes only. Haven Life does not support the companies, products, services or strategies discussed here, but we hope they can make your life a little less difficult if they suit your situation.
Haven Life does not have the right to provide tax, legal or investment advice. This material is not intended to provide and should not be relied upon for tax advice, legal advice or investment advice. Individuals are encouraged to seek advice from their own tax or legal counsel.
Haven Term is a term Life Insurance Policy (DTC and ICC17DTC in certain states, including NC) issued by the Massachusetts Mutual. Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Haven Term Simplified is a simplified Life Insurance Policy Issue (ICC19PCM-SI 0819 in certain states, including NC) issued by C.M. Life Insurance Companies, Enfield, CT 06082. Numbers and functions for insurance forms and riders may vary by state and may not be available in all states. Our agency license number in California is OK71922 and in Arkansas 100139527.
MassMutual is rated by A.M. Best company as A ++ (Superior; top category 15). The rating is from Aril 1, 2020 and may change. MassMutual has received different ratings from other rating companies.
Haven Life Plus (Plus) is the marketing name of the Plus Rider, which is part of the Haven Term policy and offers access to additional services and benefits free of charge or at a discount. The driver is not available in all states and is subject to change at any time. Neither Haven Life nor MassMutual is responsible for the provision of the benefits and services made available under Plus Rider, provided by third party providers (partners). For more information about Haven Life Plus, visit: https://havenlife.com/plus.html