Term life insurance has always been known as a “pure insurance” because it is strictly paid upon death with no cash value if left unused. Term life insurance is relatively inexpensive for this very reason. You are paying for peace of mind and protection, knowing your family would be financially secure upon your untimely death. In the event that you are still alive at the end of your “term,” any premiums paid over the years are basically gone.

Ultimately, you paid for something you did not end up needing. Those who are unhappy with that notion typically end up buying other types of life insurance such as permanent life or whole life insurances. Unlike term life insurance, these two options are “owned” and develop cash value over the years. You can even borrow against some of the policies if you have accrued enough credit.

The beauty of term life as opposed to permanent or whole life is of course the lower premiums. Cash value policy premiums are significantly costlier. Because many applicants were unhappy that they had to choose one or the other (no cash value versus something that offers some type of savings account), many insurance carriers developed a happy medium. This new offering is called Term Insurance with Return of Premium (ROP).


Term Life Insurance with Return of Premium (ROP) actually has more in common with forms of permanent life insurance than with true term life with a pure death benefit.

A Term life insurance with ROP policy offers partial or complete return of premiums in a lump sum if the insured is still alive at the end of the guaranteed level period, usually 15, 20 or 30 years. As with traditional term life, if the insured dies during the term, the death benefit is paid as with traditional term life insurance without a return of premium.

Term life with ROP works almost the exact same way as any other cash value policy. Premiums on this type of policy are much costlier because policy owners are refunded the premiums paid over the term if said policy owner is still alive. Like permanent life insurance, extra premiums are set aside in a savings account accumulating to an amount of money equal to the premium paid by the end of the term. While Term life with ROP serves as a type of savings account, keep in mind that the return is substantially less than other investment arenas such as stock potentials.

Aside from acting like permanent life insurance in terms of being a savings vehicle, some ROP products also allow loans on a percentage of accumulated premiums already paid. ROP policies are appealing to people who lead healthy lifestyles as they believe they will live past the term and receive the large refunded sum. Healthy owners of the ROP products plan to apply their lump sum amounts toward future expenses, such as college tuitions, weddings, opening a business, trips or a house down payment.

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