What type of insurance will be used for a return of premium rider?

Wouldn’t it be nice to pay nothing for your insurance coverage if you don’t end up using it? While some types of insurance – like car insurance – can decrease in cost as you prove you have little need for it, most forms of your personal insurance protection cost more as you age.

However, in Canada, some forms of living benefit insurance, such as critical illness insurance and disability insurance, allow you a partial or full refund on your premiums paid. This is offered through a life insurance rider called return of premium (ROP).

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As mentioned, return of premium is available only on critical illness insurance and disability insurance policies. It is usually available as an add-on rider. A policy with a return of premium rider works just like a regular policy: you pay the monthly premiums and the policy coverage continues. If there is a critical illness or disability claim, the policy pays out.

When return of premium rider is added, an insurance provider pays back a portion or all of the premiums paid by the policyholder under certain circumstances.

There are generally three ROP variants:

Upon death or Return of Premium on Death (ROPD)

ROPD refunds all returnable premiums paid if the policyholder passes away while the policy is in force. The premiums returned are paid to the beneficiary appointed by the insured, upon the passing away of the insured individual.

Different providers have their own individual definitions of what constitutes a returnable premium but generally will remove any advanced payments made for long-term care or child policies if they were part of the original coverage.

At the end of the contract or Return of Premium on Expiry

In this case, the insurance provider refunds premiums paid if the policy term expires without any claim being made.

When the contract is cancelled or Return of Premium on Cancellation/Surrender

In the case of Return of Premium on Cancellation or Surrender, most insurance companies will allow a partial or full return of premiums at predefined ages or depending on how long the policy has been in force.

For instance, a policyholder may have 50% of the premiums returned back to them 20 years after your coverage has begun. That percentage will increase with the insured’s age, with full return of premiums at the age of 65 or 75.

Providers have different rules and guidelines on how returnable premiums are defined, including when you can claim them. Schedule a call with our experienced life insurance advisors so we can help you select the return of premium option that works best for your needs.

Unlike in other jurisdictions like the United States, Canadian insurance companies do not offer return of premium for term life insurance policies.

For those Canadian life insurance seekers also looking to get back some or all of the premiums they pay for their coverage, there are permanent insurance options available with accessible cash value to explore.

The number one benefit of a return of premium rider is the refund of the premium that you or your beneficiary could receive. While insurance is something you buy and hope you never need, such a feature can be a helpful push for those on the fence about getting more specialized coverages like critical illness and disability.

For the risk-averse, ROP can also act as a guaranteed savings account that simultaneously provides you with income protection. Should you decide you don’t need or cannot afford the policy, you can cancel or surrender your policy and access those funds.

Cost: Nothing in life is free, adding a ROP rider to your policy can increase your monthly premium. You could decide that cash is better used elsewhere, like adding more coverage to your policy or taking out another kind of coverage that you may also require.

Opportunity cost of capital: As mentioned above, some ROP riders can only be exercised at certain ages.

And, while you do have the guarantee that you or your beneficiaries will get your premiums back, there are alternatives for saving and investing your money that would offer a better return than parking your money in a ROP rider.

Availability of providers: Lastly, insisting on ROP at expiry or cancellation option may limit who you can choose as an insurance provider, as not all companies offer the full suite of ROP variations. ROP options may also vary based on your chosen term; for instance, Return of Premium on Surrender options are typically only available on longer-term policies. The provider that offers ROP on expiry, cancellation, or surrender may not have other insurance features you seek or charge a higher premium than another provider.

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Many Canadian insurance providers offer riders for return of premium. Below is a list of some of the companies offering Return of Premium on Death (ROPD), Return of Premium on Expiry (ROPX), Return of Premium on Cancellation (ROPC), and Return of Premium on Surrender (ROPS).

PolicyAdvisor’s team of licensed brokers have decades of experience helping Canadians navigate living-benefit insurance and ROP riders. Reach out today to speak to an advisor, get instant quotes, and find the right coverage for your budget and needs.

The information and views provided herein is for general informational purposes only and should not be considered legal or financial advice.

KEY TAKEAWAYS

• Return of premium insurance riders grant a refund of the premiums you paid if you die before that term runs out, at the expiry of the policy term or coverage period, or if you voluntarily end your coverage
• Return of premium is available for critical illness insurance and disability insurance in Canada
• These riders can make your monthly premiums more expensive; you may be able to use this cash for more effective investments or alternative coverage

Editorial Guidelines: We are a free online resource for anyone interested in learning more about life insurance. Our goal is to be an objective, third-party resource for everything life insurance-related. We update our site regularly, and all content is reviewed by life insurance experts.

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• Return of premium life insurance is a term life policy designed to give you money back after the term life ends.
• Most life insurance companies carry a return of premium riders if they don’t specifically have a return of premium life insurance policy.
• Return of premium benefits may add more to your monthly premium.

Return of premium life insurance — or refundable life insurance — combines regular term life insurance with a return of premium feature. You choose the term: 20, 25, or 30 years.

At the end of the term, you get all of the premiums you paid back, as long as you made all payments and the policy didn’t lapse. For monthly payments of $26.50, a return of premiums term life insurance can benefit you.

Get your money back when you outlive your coverage with a return of premium (ROP) life insurance policy. Who offers return of premium term life insurance quotes?

Many companies offer return of premium life insurance quotes and even return of premium rider life insurance, so be sure to shop around. Ready to start saving? Take advantage of our FREE quote tool and enter your ZIP code above!

What is the catch with return of premium life insurance?

Return of premium riders will add more to your term life insurance cost. Many companies offer return of premium life insurance policies. Life insurance companies charge a higher rate for return of premium policies; however, this additional cost may be worth the return of premium benefits in the end. They invest the difference and use the earnings to help pay back your premiums at the end of the policy term.

So, can you get your life insurance money back? Yes. Will it cost you more? Also, yes.

What type of insurance would be used for a return of premium rider? Usually, return of premium life insurance is most important for term life insurance policies since they don’t add cash value.

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How does return of premium life insurance work?

It’s life insurance that gives you money back. Some companies even offer a partial premium return if you cancel your policy before the end of the term. No cash value is similar to no equity. Is a cash value life insurance policy all it’s cracked up to be?

We understand that not everybody will know what a return of premium life insurance policy is. Quizlet might have some answers but read on to learn more about return of premium life insurance.

There is some return of premium tips suggested by companies like the National Association of Insurance Commissioners.

What is a return of premium rider?

Term life insurance policies work perfectly with return of premium riders. Here’s a list of term life policies that work with return of premium life insurance:

• No Medical Exam Life Insurance
• Mortgage Protection Life Insurance
• Level Term Life Insurance

The purpose of the return of premium rider is to give you all the money you paid into a term life policy. It’s a great way to create savings for a cheap life insurance option.

How much more does return of premium term life insurance cost?

It all comes down to the interest you can earn. Remember, you’re paying more than regular term life costs. In exchange, you get all of your money back. But is that return better than the return you could earn on your own? In other words, can you do better investing that extra cost each month?

Check out a return of premium life insurance calculator to help you decide after you compare quotes. In some cases, it makes sense. In others, not so much.

How much more will I pay for return of premium life insurance? Check out the table below that compares ROP and MassMutual term life insurance rates based on healthy 30-year-old males.

For a middle-aged non-smoking male insured, return of premium life insurance rates can start at $26.50 per month or $318 per year. This rate is much cheaper than other companies like State Farm’s return of premium life insurance, which is estimated at $49.50 per month for a younger and healthier female.

Curious about rates in your area? Start comparing return quotes now using our FREE quote tool above.

What are the best companies with return of premium life insurance riders?

Let’s examine the top five companies with return of premium riders.

• AAA Life Insurance — AAA is known for its higher coverage limits.
• Assurity Life Insurance — Assurity has term life policies that last longer than the average company.
• Cincinnati Life Insurance — For a more personal customer service experience, choose Cincinnati Life insurance.
• Indiana Farm Bureau Insurance — Indiana Farm Bureau is known for term life to permanent life conversion.
• State Farm — State Farm is one of the best companies for building cash value, but you won’t be able to borrow against a term life policy.

A return of premium life insurance company will also carry permanent life insurance and other life insurance policies. Ask your life insurance company about other riders and benefits you can use.

Is return of premium term life insurance right for you?

Q:  Is return of premium term life insurance a good deal?

A:  Sometimes. It depends. Only time will tell.

I’m not trying to be cute with the ambiguity here. But truth be told, this is not merely a ‘yes’ or ‘no’ question. It’s slightly more involved than that. Let’s take a look at each response.

• Sometimes — ROP term life insurance is a good option for some people, but not everyone. To say that one is better than the other in all cases is just inaccurate. Who is it suitable for? Well, that depends.
• Depends — Three primary factors determine whether ROP term or regular term is the best fit for you.

1. The actual rate of return the life insurance company is offering on your policy. Remember, ROP term is simply a life insurance policy that pays you back all the premiums you paid in (or a portion of the policy is terminated early) if you’re not paid a death benefit. In that sense, it’s like an investment, with the investment amount being the premium difference between ROP term and regular term. Therefore, each policy has an associated rate of return.
2. The second factor is the likelihood that you can achieve a comparable or better rate of return by investing the premium difference on your own.
3. The third factor, and the one that most often trips up policy owners, is the likelihood you will stick to an investment plan and invest the premium difference for the policy’s duration.

• Only Time will Tell — Investment returns fluctuate over time. You really won’t know your investment return on the regular term/invest the difference yourself option until the end of the policy term. It’s somewhat of a leap-of-faith. But you will know upfront what the investment return on the ROP term insurance policy will be because the premiums will be guaranteed to remain level, and the amount you will receive back will not change.

You may be surprised to see that price differential is not a primary factor in determining whether ROP term is a good deal. However, it is essential to consider whether you can afford the higher costs of return of premium. Dave Ramsey might advise some clients to find a different policy since rates are higher.

To determine return of premium rates, be sure to compare free ROP term life insurance quotes online.

Return of premium life insurance, or ROP life insurance, is very much like other types of term life insurance. It is an agreement between you and the life insurance company. You agree to pay premiums, and the carrier agrees to pay your beneficiaries a sum of money should you die.

Like all life insurance, ROP term life insurance is an excellent way to protect your loved ones and give them financial security. There is one main difference between return of premium life insurance and other types of life policies. With a return of premium policy, a death benefit is paid out if you pass away with all insurance plans.

If you live beyond the term, you get all of your money back dollar for dollar. So no matter what happens to you, whether a claim is made while covered or you outlive the policy money is distributed.

You’ll need to decide what kind of asset you want your life insurance policy to be, according to the Insurance Information Institute.

Why should I buy return of premium life insurance?

Return of premium life insurance makes it possible to have coverage with a net cost of zero. ROP life insurance is also a safe place to put your money to receive what amounts to a modest return on your investment.

Return of Premium (ROP) term life insurance combines traditional term life insurance advantages such as affordable, guaranteed level premium periods with a return of premium feature. At the end of the level-premium period, 100 percent of the premiums paid will be returned to you!

Why shouldn’t I buy term life insurance with return of premium?

The main reason people don’t get ROP term life insurance is that it costs more. The insurance companies that offer this product charge slightly more for it than for non-ROP term insurance.

During the level-premium period, the insurance company can invest portions of the premium for capital growth. As a result, they can return your premiums to you at the end of the level-premium period.

You are paying for the convenience of securing level term life insurance with an added return on your policy premiums. Return of premium life insurance policy is a non-forfeiture option, so it gives you the advantage of a level death benefit and level policy premiums just as a term policy does, but with the added feature of return on your premiums.

At the end of the level period, you select 100% of the premiums paid will be returned to you as long as you have paid your premiums throughout the period of insurance and a claim is not filed.

Most people get return of premium term life insurance policies for 20 or 30 years as the comparative return on your investment will be higher the longer you have the policy.

Return of premium senior life insurance policies may not be necessary. Adding a rider will raise your cost, so if you get a long enough term, you might not have to consider outliving your policy and needing ROP.

For more information, start now with a free return of premium term life insurance quote and compare the affordable return of premium life insurance.

What is the least expensive type of ROP life insurance?

The least expensive type of life insurance is term life insurance. Yet, some people shy away from it because of its temporary nature.

Term life provides coverage for a set period of time (generally 10, 15, 20, 25, or 30 years). If you die before a traditional term life policy has expired (or if you renew your policy to extend the term), your beneficiaries get a payout. If you don’t die during the policy term, they don’t get a payout and you dpremuon’t get any of the money back that you’ve paid in premiums.

But what makes term life insurance a viable option is that it’s flexible and extremely affordable compared to permanent life insurance policies that come with high-priced premiums.

That’s precisely why I opted for a 20-year term policy to protect my family. While there are still mortgage payments to make and college education expenses to pay in the not-so-distant future, I feel better knowing my husband will have a financial cushion if tragically the unexpected happens to me.

So what do you do if you need cost-effective life insurance but you’re not digging the idea of making premium payments that will be all for naught if you outlast the term of your policy?

Do you get money back on premium return term life insurance?

Return of premium term life insurance typically provides coverage for a term of 15, 20, 25, or 30 years. If you don’t die before your policy’s term ends, the insurance company pays you back in full for the amount you’ve paid on your premiums.

State Farm return of premium life insurance lays out some of their specific details on their website.

Return of premium insurance may even be available from other insurance providers that offer a variety of insurance types.

For example, AAA return of premium life insurance is a policy that many didn’t know was available. Still confused about what return of premium is? Get familiar with life insurance terms to stay on track.

What are the pros of ROP term life insurance?

With return of premium life insurance, you could have coverage with a net cost of zero dollars. If you pass away during the term of the policy, your beneficiaries receive a death benefit; if you outlive the policy’s term, you get all your money back.

ROP term life insurance combines the advantages (affordability and guaranteed level-premium periods) of traditional term life insurance with the return of premium component.

Who sells premium life insurance returns? Many companies offer return of premium life insurance now, so you should have plenty of options.

What are the cons of term life return of premium insurance?

It probably comes as no surprise that ROP term life insurance will cost more than traditional term life. Life insurance companies would need to get something in return to guarantee that they’ll either be paying a death benefit or returning all premium costs dollar for dollar to you one day.

Also, you need to stay current with your premium payments throughout the policy term. And if you terminate your policy early, you will likely only receive a portion of the premiums you’ve paid to the insurance company. Many sources warn buyers that normal term life insurance could be an empty investment.

Is return of premium life insurance worth it?

While you will probably find it more affordable than permanent life insurance, that’s not a question I can answer here. Only you can decide what will be the best choice for your peace of mind and your loved ones’ financial well-being.

Finding the best term life insurance coverage with return of premium could be a smart investment over time.

What’s the bottom line?

Educate yourself about your options, talk with a trusted insurance professional, and ask questions so you understand the pros and cons of this type of policy. An ROP calculator can help you compare the cost of a traditional term life policy to an ROP policy. Ultimately, it’s up to you to decide what life insurance coverage is best for you.

Now that you know more about this money-back insurance, get started comparing return of premium life insurance quotes and regular term life insurance quotes with our FREE quote tool below.