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What is Return of Premium in an insurance policy?

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Return of Premium (ROP) is a relatively new feature available in Term Life Insurance. The major drawback to Term Insurance is that if you live beyond the stated term of the policy one of two things happens. It either ends completely and all your premiums are gone forever or it increases from the guaranteed premium to some new amount which is generally thousands of dollars more. A recent 43 year old female I quoted had a $325 premium guaranteed for 20 years but if she wanted to continue coverage in year 21 without being medically underwritten, the cost was over $7000. To solve this insurance companies added a Return of Premium rider. In the example above, if she lived for twenty years she could get all the premiums she paid back. There would be no interest or other enhancement, just the exact amount paid. However, to continue the example above, the premium amount with the ROP included would be $1103 for this woman. It is important to know that this idea has been extended to some other forms of coverage. One company that offers Defined Benefit Health plans and supplemental plans has a rewards program that does the same thing. If you keep the plan in place for five years you can get 50% of your premiums back, wait until year 7 and get 75% back or wait until year 10 and get 100% back. Many of my clients like their supplemental plan that includes Ameritas Dental, VSP vision, Rx plan, $10,000 AD&D, $7500 Accident plan and much more for only $89/month for the whole family. That is cheaper than most family dental plans.
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