Best Return of Premium Term Life Insurance Options?

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Although Return of Premium Term Life Insurance entered the insurance market with a “Bang,” the interest has begun to wane as many financial gurus condemn the product as being overpriced.

These gurus who opine regularly about the additional cost of the return of premium (ROP) are typically guilty of painting all insurance shoppers with a broad brush.

Ordinarily, their argument is that a policyholder could have invested the additional premium for the rider and done much better in the long term.

For many insurance shoppers, this may be true, especially for older adults who are typically just looking for the cheapest life insurance available. It may also be appropriate for savvy investors who are typically much more diligent when it comes to accumulating wealth through investing over time.

But, there is a large group of consumers out there who should consider return of premium term life insurance as a legitimate solution for purchasing low-cost life insurance and investing an additional amount of money at the same time.

The group of consumers being referred to here is hardworking young adults who simply do not have the time or diligence to grow their money using traditional investment products.

Here, we’ll discuss return of premium term life insurance and why it can be an investment product that can work for you.

 

What is Return of Premium Term Life Insurance?

 

First, we need to understand exactly what this insurance product is.

Certainly, most consumers are aware of Term Life Insurance and understand that it is the most economical life insurance product available in the marketplace. The term “Return of Premium” is the name of a rider that can be added to a term life insurance policy for an additional premium.

What the Return of Premium (ROP) rider does is provides for the insurance company to return all of the premiums you’ve paid on your term life insurance policy if you outlive the policy term you selected. No, you do not earn interest on your paid premium and yes the insurance company does. Since the insurance company is earning interest on the cost of the ROP rider over a long period of time, they are willing to return the premiums you paid in.

And, by the way, returned premiums are non-taxable to the policyholder.

 

Here’s an Example of Return of Premium Term Life Insurance

 

Richard is a self-employed hardworking husband and dad who just can’t seem to save much of his paycheck for his retirement. He knows he needs to buy some life insurance to financially protect his family if he happens to die unexpectedly and has decided to speak with his agent about getting a term life insurance policy in place. Mark, his agent, after speaking with Richard about protecting his family and investing in his retirement talks to Richard about Return of Premium Term Life Insurance and how it may be the solution for financially protecting his family and saving for the future at the same time.

Here’s what Richard’s insurance agent proposed:

Richard’s agent suggested that he should buy at least $250,000 life insurance coverage and then add the ROP rider. The premium for the life insurance and the ROP rider would be $112 per month which Richard feels he can afford.

Since Richard is 30-years old, his policy would provide $250,000 in life insurance coverage for 30 years. If Richard should die during the policy term, his beneficiary would get the $250,000 death benefit tax-free (problem #1 solved).

If Richard is alive at age 60 (when his policy expires), he would get a check for $40,320 which is also tax-free (problem #2 solved). Richard could then invest the $40,320 in an annuity or other financial product and supplement his retirement income when he decides to quit working.

 

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What companies offer Return of Premium Term Life Insurance?

 

With the low interest rate environment, many life insurance companies have discontinued return of premium term life insurance.  The only companies that we can find that offer return of premium term are:

All companies will differ in rates that are offered.  Just like all life insurance policies, the main rating factors are gender and age.  Your health will also play a key role in your rate class.

 

Return of Premium Term Life Options

 

Term lengths range from 15 year all the way to 30 years.  Only a couple of companies offer a 15 year ROP policy.  The majority of ROP policies have 20 year and 30 year term duration.  

It may also surprise you that the longer the term period, the cheaper the return of premium policy will be.  This is due to the fact that the longer the policy duration, the more time the insurance company will have to earn enough money to pay back your premium.

There are also some variations that allow for premium to be returned at a dialed in age. Most of these policies are universal life insurance policies.

Some ROP life insurance policies also offer additional riders that can be added to your policy.  You will see some of the following riders:

  • Other insured rider
  • Children’s term rider
  • Disability rider
  • Critical illness benefit rider
  • Disability Waiver of Premium Rider
  • Monthly Disability Income Rider
  • Accident only Disability Income Rider

Each company differs in the amount of premium they return.  Some may not return the cost of the rider, only the premium paid for the actual term life insurance. 

Make sure you see the full illustration that breaks out the schedule of premium returned.

 

Best Return of Premium Term Life Policies

 

With around 10 life insurance companies offering return of premium term life insurance, how do you know which company is best?

The top 4 return of premium term life policies based on price alone will be from:

  • Assurity Life Insurance Company
  • Cincinnati Life Insurance Company
  • Illinois Mutual Life Insurance Company
  • AAA Life Insurance Company

We also have to mention that there are some simplified issue return of premium term policies.  These will be more expensive but will usually issue pretty quickly with no medical exam.  If you are healthy and wanting to purchase a ROP policy, go with one of the companies listed above.  

If you feel like you are average health and do not want to go through a medical exam to purchase your ROP policy, you may want to consider one of these:

  • Americo Financial Life and Annuity Insurance Company
  • United of Omaha Life Insurance Company
  • United Home Life
  • Baltimore Life Insurance Company
  • Columbian Life Insurance Company

Our top pick for return of premium term life is Assurity Life and Cincinnati life.  An outline of coverage and benefits are below. 

Out of these two companies we like Assurity Life.  Assurity Life has an accelerated underwriting process where one can qualify for the preferred plus non-tobacco rate class with no medical exam.  

 

Assurity Life Insurance Company Return of Premium 

 

Assurity Life offers return of premium by way of a rider called an Endowment Benefit Rider (EBR).  The  EBR provides for the return of premium to the owner of the policy when terminated for any reason except death.  The death of the insured will pay the face amount of the policy to the primary beneficiary.

The Endowment Benefit will be paid to the owner and the end of the level term period and the EBR will terminate.   Again, if the policy owner cancels before the end of the term period, they will receive a percentage of the premium back based on a predetermined schedule listed in the policy.

Like other ROP policies, charges for rated based policies are not returned nor are the cost of the riders or policy fee.  Only the base insurance premium will be returned.

The Endowment Benefit Rider is available to the following:

  • 20 year level term period (Ages 18 – 60)
  • 30 year level term period (Ages 18 – 50)

The EBR is not available on the 10 year term and 15 year term base policies. 

 

Cincinnati Life Insurance Company Return of Premium Term

 

Cincinnati Life offers the Termsetter ROP.  The return of premium is built into the policy base and offers a money-back guarantee.  Just like Assurity Life ROP, rider and substandard premiums are not returned.

Term periods available are:

  • 20 Year ROP Term (Ages 18-60)
  • 25 Year ROP Term (Ages 18-55)
  • 30 Year ROP Term (Ages 18-50)

Additional features of Cincinnati ROP Term:

  • Guaranteed level death benefit
  • Guaranteed level premiums for the term duration
  • Convertible to an eligible whole life or universal life policy through insureds age 70

Optional coverages at additional cost (premium not returned on optional coverages)

  • Accelerated Benefit Rider
  • Accidental Death Benefit Rider
  • Children’s Term Life Insurance Rider
  • Disability Waiver of Premium Rider

Return of Premium Termsetter is not available in 10 year or 15 year term durations.

 

Why Doesn’t Everyone buy Return of Premium Term Insurance?

 

When we compare the consumers who buy return of premium term life insurance with those who don’t, we typically see a difference in the type of consumer and the age of the consumer:

  • Those who buy term insurance with the return of premium rider are usually looking at a long-term solution to saving money on life insurance.  Lets face it, 20 years goes by fast.
  • Those who do not buy term insurance with the return of premium rider are usually looking to save as much money as they can on life insurance by choosing the policy with the lowest cost. 
  • The age of the applicant can also have an impact on who will or will not buy term life insurance with the return of premium rider because the rates are more affordable for young adults.

 Here’s a comparison for two 40-year old healthy males for a $250,000 30-year term insurance policy:  

 

ANDREWSTEVEN
40-Years Old40-Years Old
30-Year Term Life Insurance Policy30-Year Term Life Insurance Policy
Annual Premium $600Annual Premium $1,200
Total Premium Paid $18,000Total Premium Paid $36,000
Refund if Outlives the Policy $0.00Refund if Outlives the Policy $36,000

 

What are the Pros and Cons of Return of Premium Term Life Insurance?

 

Certainly, there are advantages and disadvantages with any type of life insurance product. Not because the product is flawed but because everyone has different needs that life insurance can resolve. Since the needs are different, the solution (the type of product) will be different as well.

 

Advantages of Return of Premium Term Life Insurance

 

  • If you should die while your return of premium life insurance policy is in force, your beneficiary would receive the full death benefit of the insurance policy. This would not be the case with other traditional investment products.
  • Consumers who are not as disciplined as they should be when it comes to saving for the future are forced to save when they use return of premium term life insurance.
  • You don’t have to die to get your money back.
  • If you cancel your return of premium term life policy early, you will get cash back.

 

Disadvantages of Return of Premium Term Life Insurance

 

  • If you elect to cancel your policy during the policy term, you would only receive a portion of your premium back.  The returned premium would usually be less in the earlier years unlike Whole Life or Universal Life Insurance 
  • The cost for Return of Premium Term Life Insurance can get very expensive depending on your age at the time of purchase. Most companies start with an additional premium of around 50% that can easily increase based on your age.
  • You will probably earn a higher return on the additional premium you pay for return of premium term life insurance if you invest in other traditional investment products. (You would however, be exposed to investment risk)

Is return of premium term for You?

Several life insurance companies offer return of premium term life insurance but the product can differ among different companies. This is when you can rely on us here at InsuranceQuotes2Day.com.

We represent all of the top-rated insurance companies and among them can find the best solution for your individual needs.

FAQs for Return of Premium Term

What is return of premium term life insurance?

Life insurance at 60.

Return of premium term life returns the premiums paid back to the policy owner when the term duration is met.

Who offers return of premium term life insurance?

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There are roughly 10 companies currently offering return of premium term life insurance. Assurity Life and Cincinnati life stand out as the best.

Do you get your money back at the end of the term period?

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Yes. Once you reach the 15, 20, 25 or 30 year term life duration, you premiums will be refunded. You can also terminate your policy early and receive a reduced percentage of the premiums paid.

Want a Return of Premium Term?
For more information about Return of Premium Term Life Insurance and whether it will be right for you, please call us at (800) 712-8519 during normal business hours or contact us through our website and we’ll be happy to discuss it.