If you choose a term life insurance policy with a premium rider, you will receive a refund of your premium payments if you outlive the policy’s term. This insurance plan may have a higher premium in order to cover these costs. For this reason, it is frequently referred to as the return of premium term life insurance, as this benefit is typically only available in term life insurance policies. Furthermore, we will explain how premium life insurance policies work and the best return on a premium life insurance policy.
In most cases, you cannot cancel your insurance policy and receive a refund. But return-of-premium life insurance is an exception. You can get your payments back if you outlive the policy’s term with this sort of insurance, which is also known as a return of premium (ROP) life insurance policy. Although it is usually sold as an add-on to a life insurance policy, certain insurance companies actually sell it on its own. This list focuses on different return-of-premium policies.
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A return of premium life insurance policy, like a typical term life insurance policy, requires regular premium payments to work. These life insurance premium payments are normally non-refundable and owned by the insurance provider under basic plans. You may be able to recoup these payments if you outlive your term on a premium life insurance plan.
Assume you purchase a 20-year premium-term life insurance policy. If you die during the 20-year term, your family will receive the death benefit, while the insurer will keep the premium payments. However, if you live longer than the 20-year term, you will be eligible for a reimbursement of your premium payments.
Pros
The possibility to retrieve prior premium payments is the most significant advantage of the return of premium life insurance. If you outlast your term, you may be entitled to receive a single lump-sum payout that includes all previous premiums paid. This may be especially useful if you have any extra expenses to cover later in life, such as a mortgage or retirement plan.
Return of premium life insurance policy can work as a savings account with a bonus life insurance add-on in this regard. Furthermore, returns from this kind of plan are typically not taxed. 3 As a result, if the occasion arises, you may be entitled to receive your lump-sum premium payment tax-free.
Not many insurance companies provide this option, but at Aflac, you may be able to investigate a return of premium benefit if it seems interesting.
Cons
The cost is one of the most significant disadvantages of the return of premium life insurance. Return of premium life insurance is typically far more expensive than regular term life insurance in order for insurance firms to offer this benefit. The greater cost may be more equivalent to whole life insurance, depending on the providers and plans you are considering.
Another option is to buy a less expensive traditional-term life insurance policy and invest the difference as you see fit. It is determined by how you evaluate the risk and return in each sort of plan. A conversation with an agent might help you define your boundaries.
Obtaining a return on a premium life insurance policy could be a worthwhile investment if one is capable of paying a premium increase. However, in the event that one does not surpass the term, the investment will have been considerably more costly compared to a conventional term plan, despite providing an equivalent mortality benefit.
It is essential to understand that you are only receiving the funds that you have already contributed to the policy, not any additional funds. Furthermore, there is a possibility that the realization of this benefit will elude you. Standard-term life insurance may be more suitable for you, as the premium difference can be remitted towards an investment of your preference.
Whether a premium life insurance policy is suitable for you should be determined by weighing its advantages and disadvantages against those of alternative life insurance plans.
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Return of premium (ROP) insurance is a variant of term life insurance wherein the premiums paid are refunded should the policyholder outlive its term. In the event of demise during the policy’s term, the policyholder receives a mortality benefit. If you outlive the term of a standard-term life insurance policy, you will not receive a payout. ROP insurance is significantly more expensive than traditional term insurance, but it can serve as a financial incentive to save money that you may return in the future. Although ROP term life insurance is not provided by many companies, the following are the best return of premium life insurance policy that do offer it:
#1. Mutual of Omaha
Mutual of Omaha life insurance is our top-best option for the return of a premium life insurance policy for several reasons. Qualified candidates can make a decision on coverage the same day and avoid taking the medical exam. In addition, the company’s ROP policies include a terminal sickness living benefit. You can change your policy to a permanent life insurance policy (such as whole or universal life insurance that lasts your entire life) until the policy’s term expires or you reach the age of 70, whichever comes first.
You can also extend coverage beyond the level-term period until the age of 100 if you like. That’s astounding when you consider that some firms limit the conversion period to the first ten years of the policy and many limit renewability to age 80 or 90. Mutual of Omaha also provides a range of riders on their ROP plans, including a premium waiver rider, accidental death benefit, and children’s term rider (all for an additional fee).
However, if you want a return of a premium insurance policy for a duration other than 30 years, you should look into other insurers. In addition, the company issues no-exam term policies through a procedure known as streamlined underwriting. While this is a quick way to get coverage, rates may be better with firms that offer expedited issues, a type of no-exam underwriting.
Pros
- There are many conversion possibilities
- Can apply without taking an exam
- Qualified applicants can receive a decision the same day.
- Includes a rider for terminal sickness.
Cons
- Online applications are not available.
- For ROP insurance, there is just one term available.
- Underwriting is simplified.
#2. AAA
Those who aren’t sure how long they want their term insurance to last will be pleased to learn that AAA offers 15-, 20-, and 30-year terms on their Return of Premium policies, which is more than most. AAA may be the best option for you if you prefer the comfort and convenience of no-medical-exam life insurance because it is one of only three of our top-ranked life insurance providers for the Return of Premium policy that offers no-medical-exam underwriting. However, with AAA’s ROP rules, you will not be able to customize your policy with riders.
Pros
- More terms are offered than many competitors.
- Can apply without having to take a medical exam
- Convertible until the age of 65 or the conclusion of the term period, whichever comes first.
Cons
- There are no riders available for ROP policies.
- Online claims cannot be initiated.
- More complaints than anticipated
#3. Assurity
This has many positive characteristics, but we particularly admire how it elevates corporate responsibility. Assurity is a certified B corporation, which indicates it adheres to high standards of accountability and openness and is dedicated to social fairness and environmental sustainability.
It also receives fewer complaints than one might expect from a corporation of its scale. You can also customize your coverage by adding riders such as a disability waiver of premiums and a critical illness benefit.
The conversion time for ROP and other term insurance is only two years short of the policy’s normal term length (or until you reach the age of 65). For instance, if you buy a 30-year policy, you can change it to permanent coverage until the 28th year. That’s not as good as the Mutual of Omaha and AAA alternatives, but it’s still enough.
Assurity, like our other top-selling businesses, allows you to apply for coverage without a medical exam with an agent.AM Best rates the company’s financial strength as A-, which, while solid, is the lowest of all the “best” ROP firms on this list.
#4. State Farm Life Insurance
Selecting a financially stable life insurance company may reassure you that it can pay for decades. AM Best gave State Farm an A++ rating, the highest of any company on this list.
AM Best ratings assess an insurance company’s strength and stability, as well as its likelihood of meeting contractual obligations now and in the future. Aside from its financial stability, State Farm ranked first in a J.D. Power 2021 customer satisfaction study. This makes sense given the NAIC reported fewer customer complaints than expected
Additionally, we appreciate the flexibility of a return of premium insurance policy conversion to permanent coverage until the term expires or reaches the age of 75, or term renewal until the age of 95. Premium waivers and children’s term riders are available for 20- and 30-year terms. You may also combine this coverage with a State Farm auto policy to receive further savings.
#5. John Hancock Life Insurance
John Hancock’s wellness benefits set it apart from the other life insurance providers we looked at. Its Vitality PLUS program provides policyholders with up to 25% in premium return every year they join, as well as savings on a number of wellness products, tools, and subscriptions. The Vitality PLUS program can potentially save you up to $600 on fresh fruits and vegetables per year.
ROP insurance is offered for 25 and 30 years without a medical check and can be given on the same day. They also feature a no-cost terminal sickness rider. However, policyholders who purchase the ROP rider are only qualified for reimbursements of up to 75% of premiums paid at the end of the level-term policy—a lower amount than some rivals offer as a full return.
John Hancock’s ROP insurance is most often criticized for not being convertible and not being given to candidates over 50.
The insurance firm usually refunds some of the money if a policyholder cancels before expiration, makes extra payments, or changes the terms.
Return of premium (ROP) life insurance restores premiums if you outlive your term. In exchange for this benefit, you will pay higher premiums for the duration of the policy.
ROP-term life insurance is exciting because its cash value appreciates over time. You can borrow, withdraw, or surrender insurance cash value if you no longer need it.
For example, if you paid $20,000 in premiums over the course of your 30-year term policy, the business would refund you $20,000 at the conclusion of the term as specified in your policy.
A return of premium term policy offers life insurance and a 105% return on premiums at maturity. This policy has the added benefit of providing both death and maturity benefits.
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