The return of premium life insurance policy has gained popularity in recent years thanks to its very high return rate. The return of premium (ROP) life insurance offers some advantages for those who are diligent at keeping up with their premiums and have a steady flow of income that is resistant to change.
It is important to understand what a return of premium policy is. You will get to know the overall working principles and whether it is worth the overall investment for your particular needs.
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What is a Return of Premium Life Insurance?
The return of premium life insurance is one of those policies that have gained considerable attention in recent years. This is because, for those who are very diligent about paying their premiums, this can be a very beneficial policy for those who have a steady stream of income.
Essentially, a return of premium policy is one that returns the payments made by the person over a set period, minus any fees or charges from the life insurance company. For example, if you take out a 10-year policy with “Return of Premium” clause, if you outlive the ten year period you will receive back most of the money paid into the policy.
In many ways, an ROP policy is very similar in structure to term life insurance. However, the big difference is that at the end of the term you get your premiums back with interest and minus any fees or charges along the way.
ROP policies have been around since the early 1990s but have been gaining favor over the years thanks to their high rate of return for policies that go out of date. However, are they the best type of life insurance policies for you?
How does It Work?
In most life insurance policies, the premiums you pay don’t return after the term of the policy expires. However, ROP means that the more you have invested, the greater the working principle that will be paid back if you should outlive the term of the policy.
However, this also increases the chances that you will either not outlive the policy or that you may fail to keep up the premium payments. These risks will need to be evaluated before choosing such a policy.
Is Return of Premium Life Insurance Worth It?
The real question is whether an ROP life insurance policy is right for your needs and your budget. There are many advantages to getting an ROP policy, but there are also some disadvantages as well which may make this unattractive to some. Dave Ramsey calls it a gimmick.
Getting Premium Back w/Interest
This is the reason for getting this type of policy. A person can see the money they invested come back with interest over a set period. For many, a return of premium policy represents an enormous benefit that can be used to invest in retirement, child college fund or other need that can be fulfilled by this particular type of policy.
Higher Premium Cost
However, even a return of premium life insurance no medical exam policy is substantially more expensive regarding the premiums that are paid. For many, this represents too much of a monthly investment on the family budget. However, for those who can make the sacrifice this type of policy does offer healthy benefits.
Good Investment Strategy
ROP has become successful because it does serve a dual purpose. You are investing with a high-interest rate and providing protection in case something unexpected should happen. This is true in the relatively short term when for example a ten year ROP policy may be the perfect choice for those with children reaching college age.
Sustain the Premiums
Life insurance companies are more rigid when it comes to their ROP policies, so maintaining your premiums is even more important. That is why this type of policy is suitable for people with substantial incomes and long job histories. Even if you take a long-term policy, say 30 years, for example, it will still take 15 to 20 before you can get even a partial return assuming you break the plan. State Farm offers level term for 20 or 30 years.
There are few things as disheartening as getting close to the end of a ten year ROP policy. You only have it canceled due to lack of premium payments and get nothing for your investment.
How and Where to Buy ROP Life Insurance?
Check out the pros and cons of return of premium life insurance.
Finding the right ROP policy for your needs should start online as you can compare plans directly. Obviously, if you are working with an insurance company, you’ll want to check out their terms. However, you should not limit yourself to just the few that you know. This is because several companies offer excellent rates for such plan. They provide good terms as well that you can take advantage.
Plus, many insurance companies will allow you to receive a free quote based on length of term, amount of benefit and monthly payment that best suits your budget. For those who want to find the best type of policy, you should start by getting free quotes from a number of different sources.
In fact, you can start from us and get a free quote for a return of premium life insurance policy. All you need to do is fill out a little information and send in the form. Within a short time, you will receive a free quote for what an ROP policy will cost in terms of monthly premiums and provide an interest rate. This will show you how much your benefit will be if you live past the duration of the policy. By starting with this free quote, you can then find the right type of ROP plan to meet your specific needs.