Return of premium life insurance (ROP) certainly offers many advantages and disadvantages for the consumer. Understanding the return of premium life insurance pros and cons will help make the decision easier.
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What are the Return of Premium Life Insurance Pros and Cons?
ROP pros and cons may vary depending on the length, premiums and benefits that the policy provides. However, there are certainly advantages and disadvantages present for those who want to pursue this type of policy. What follows are the pros and cons of return of premium life insurance.
Flexibility: ROP life insurance offers the same type of flexibility as term insurance in that you can choose the time period, benefit and premium rate that best suits your needs.
Return of Investment: Compared to a standard term life insurance policy, the rate of return for your investment is quite high indeed. In fact, of the pros and cons of return of premium policies, this may be the biggest advantage available.
Non-Taxable Sum: Once the lump sum is paid out, there are no taxes that are due. This is because you have already paid taxes on the money that was put into the premiums which means that withdrawing them at the end of the term will not require any additional taxation.
High Rate of Return: The guaranteed return rate is considerably higher than you’ll find in many traditional life insurance and savings policies.
However, the ROP policy does carry some disadvantages as well. For those who may be looking at the advantages, it pays to see what type of issues may not make this particular policy right for you.
High Premiums: In general, the premiums are significantly higher than found in typical life insurance policies. You will need to weigh the options to see if the rate of return is worth the investment.
Interruption Causes Cancellation: An ROP policy needs to have its premiums fulfilled to the fullest otherwise the risk of cancellation is great. For an ROP policy to succeed, a person needs a steady income stream that can withstand changing times and conditions.
Availability: Different states have different rules about life insurance policies and they may not be available everywhere or they may have certain restrictions. Before you start checking around for ROP policies,
However, if the policy is one that last for 20 years or more, then a partial return might be possible in that time frame. You will need to check the specific policy as it may not apply to all ROP life insurance.
Is ROP Life Insurance Really Worth it for Your Needs?
Overall, the return of premium life insurance pros and cons are such that anyone considering such a policy should weigh several factors before making the decision. You can search us for free quotes to find the right policy. For someone who has built up a steady, secure income and is concern about covering a period in their life with life insurance that offers an excellent return rate, then this type of policy may be best for you.