Compare Term Life Insurance With Return of Premium (ROP)
We put up a new page on Return of Premium Term Life Insurance. We would like to explain this a little more here. Return of Premium (ROP) is actually a rider you can select to add to some term life policies. It costs a little more, but you do get a big benefit. So sometimes a rider can cost more, but it can leave you with more money in the long run.
Let us say you purchase a 30 year term policy with $200,000 of death benefits. If you pay your premiums for 30 years, you have coverage in case you die. But if you do not die, your policy has turned into a worthless piece of paper at the end of 30 years. You can consider yourself lucky to be alive though!
But consider an example of purchasing that same 30 year term policy with a ROP rider. At the end of 30 years, if you kept your policy in force (paid the premiums), you will get a check back for every cent you spent! How much luckier is that?
Look at Ms. Davis who purchased a 30 year term policy with a $250,000 death benefit when she was 32. Remember that I am just using some example numbers, so do not think these represent actual premium prices. But let us say her monthly premium for term life is $32. If she choose the return of premium rider on her term life policy, she would pay $5 a month more. So that would make her term life with return of premium cost $37 a month.
With just the term policy, she could make it to the age of 62. After having paid over $11,000, she gets to tear up her policy. What if she had decided to pay extra for the return of premium benefit? Well, she would have paid more. She would have paid over $13,000 over 30 years. But, at the end of that time, she can collect a check for that amount back from her insurer!
This can be a handy tool for retirement planning too. You have purchased coverage for your working years when your mortgage must be paid off and children have to be supported. Then, when you face retirement, you can get a handy check to help you fund your accounts. Or sometimes, a year or so before the term policy will expire, insurers will offer to convert to whole life so you can use your check to fund retirement life insurance. A seniors life insurance policy is usally a smaller face value whole life policy that can pay for final expenses.
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[...] Ed Hinerman On Life Insurance wrote an interesting post today onHere’s a quick excerptCompare Term Life Insurance With Return of Premium (ROP) We found a handy Return Of Premium Life Insurance Calculator online, and that reminded us that many life insurance shoppers may not know about this option (rider) they can select with many highly rated life insurance companies. However, if you are comparing life insurance policies, then this is an option you will not want to overlook before you buy. It has features that appeal to people who like cheaper term life insurance premiums, but h [...]