Does a Return of Premium Rider fit into your life insurance goals? A life insurance policy is designed to protect your loved ones from a financial disaster? That’s the whole reason for life insurance. However, instead of buying lifetime coverage, you may only need to protect your loved ones from short-term expenses. These can be things like your mortgage, a loan, or your child’s education.
In this situation, a term life insurance policy may be your best option for coverage. The term life insurance policy provides you a level rate for a specific period of time. You can buy term life insurance policy for 10, 20 or 30 years for example. If you purchase a return of premium rider with your policy, you can get all of your policy premiums paid back to you if you outlive your policy.
Let’s learn more about the ROP rider, how much it will cost from the best life insurance companies, and how a Return of Premium option may or may not be a wise choice.
Return of Premium Rider
When you purchase a term life insurance policy, you sometimes have an option of buying a life insurance rider that allows you to customize your coverage. These options can be attached to your basic term life insurance policy contract to customize and enhance your policy so it can meet your needs.
A term life insurance return of premium rider is one such rider. A return of premium term life insurance rider will pay all your premiums back to the life insurance policyholder at the very end of the term.
Return of Premium Rider Definition
If you purchase a return of premium life insurance rider all of your premiums will be returned back to you at the conclusion of the term period. An exception is the amount paid for the additional riders, additional benefits or the additional charges for a high risk client.
Can Anyone Buy Return of Premium Life Insurance Riders?
Most people can buy a return of premium life insurance rider. Life insurance companies that offer a return of premium rider typically offer this option for those between the ages of 18 and 75. Riders, like life insurance policies, often are less expensive for younger shoppers who are in good health.
Typically, shoppers with high risk conditions, or have severe pre-existing health conditions may not be able to qualify for this additional rider. The good news is. Many health conditions are approved for return of premium riders. If you are diabetic, a cancer survivor, or have heart disease you have a chance to be approved.
How Do Return of Premium Life Insurance Riders Work?
When you purchase your term life insurance policy the company may provide the option to purchase an additional rider. Not all riders are offered by all companies. Some life insurance companies may only offer a few riders.
Many life insurance companies offer a return of premium built into the actual life insurance policy. You won’t have to purchase an additional rider, because it will be built into the policy itself.
Return of Premium Riders Can Be Expensive
You’re going to pay more If you buy a term life insurance policy with a built in return of premium option or you add an additional return of premium rider to your policy.
A return of premium life insurance policy can provide you the opportunity to get all of your premiums back, but this comes at a higher cost to you. Your total premium can increase 100% or more depending on several factors such as the term length and company that you choose.
Best Term Plan with Return of Premium
Let’s look at some sample rates for a 45-year-old male. He is shopping for a $500,000 life insurance policy at a 30 year term with Preferred Best non-tobacco rates.
- For just over $81 per month he can get a 30 year term with Banner life.
- If he purchases the additional return of premium rider, he’s looking to spend just over $183 with Prudential life.
Is this a smart purchase? It will all depend on each individual’s goals and needs.
You need to find out if it’s worth the extra cost when comparing the return of premium benefit to a policy that has a longer-term, higher death benefit coverage, or even a life insurance policy with permanent coverage.
Final Thoughts
A return of premium life insurance policy can sometimes appear to provide you a great guarantee. However it’s very important to understand how this life insurance product works. For the most part, this type of life insurance policy will cost you much more upfront because of its return of premium guarantee.
Keep in mind you need to factor in inflation over the term length to see if this product makes sense for you. Often times there isn’t a significant benefit once you factor in inflation. You also need to factor in how much you would earn if you invested the additional cost of return of premium. Investing this difference in premium into long-term conservative investment vehicles can often bring you a better return.
Typically, a term life insurance policy is often your best option because it protects your family at an affordable price. Please let us know if you have any questions about life insurance, coverage, or return of premium riders. We will be happy to help you and answer your questions to make sure you’re getting the best coverage at the lowest rate possible.
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