Buying an insurance policy needs to be done with care. It is not something that you buy and can return and get the money back as you do with any of your lamentable jacket, recently bought.
Among the different life insurance types, the term life insurance is highly preferred. However, now breaking the conventional wisdom is a term life insurance: return of premium life insurance is often called ROP Term Life Insurance. It is regarded to beat the conventional system is said as this ROP life insurance assures money refund if you survive the policy term. Thus, this appears to be a convincing proposition for people cringing at the very thought of buying insurance, considering that there is no possibility of getting a payout ever in life.
What is ROP insurance?
ROP refers to Return of premium. This life insurance relating to term life guarantees your premiums return by the term end. In fact, companies offering ROP term mention it as: premium rider return.
It means on purchasing the term insurance in association with ROP and you are alive at the term period end, implies you get your paid premiums 100% returned and it is tax free. Based on the age of your ROP term life end, this money can be used to extend the coverage duration.
Now, that you are assured of your premium returns, understand the pros and cons of ROP
- Death of the insured during the term is paid a death benefit, identical as any other term policy.
- Term policy allows choosing term as per your situation.
- The premiums of the term policy are returned on outliving the policy term.
- The refund premium is tax-free money.
- The life insurance premium return acts as a compulsion to save each month and it works as automated saving plan.
- Return of premiums ensures building cash value and allows taking loans against the value. However, these loans must be repaid or it will be reduced in the death benefit or the premium refund.
- ROP policy premiums are expensive than the regular term policy. However, the hike in price depends on several factors.
- The policy cancelation prior to the term results in very small or no refund.
- The details of the policy vary between insurers, so carefully go through the details.
- No interest is earned on the money, while you get in return only the premiums paid.