Return of Premium (ROP)

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Return of Premium (ROP) It is the amount due the insured if the actual cost of a policy is less than what the insured has previously paid for example, if the limits are reduced, the estimated exposure at inception is greater than the audited exposure, or the policy is canceled. How does return-of-premium life insurance work? Return-of-premium life insurance can be sold as a standalone policy or as a life insurance rider, which gets added to a standard term policy. When you buy return-of-premium coverage, you typically select a term length, such as 20 or 30 years. If you die during that time, your beneficiaries receive the death benefit. If you outlive the policy, you get back exactly what you paid in, with no interest. The money isn't taxable, as it’s simply a refund of the payments you made. This benefit refunds a percentage of the premium (provided there are no claims) at specified intervals during the life of the policy. The good thing about return of premium is that, adding a return of premium rider to a term insurance policy may boost its cost substantially. Whether a return of premium rider makes financial sense depends on the likelihood that the policyholder will invest the money elsewhere at a higher return Return-of-premium life insurance pros and cons. Pros: -If you outlive your policy’s term, you get your premium payments back. -The returned money isn't taxed since it’s not income, but simply a return of the payments you made. Cons: -It’s much more expensive than regular term life insurance. -You generally have to hold the policy for the entire term and make all payments to get your money back. #benewinsurance #insurtech #inclusiveinsurance #insurance #reinsurance #takaful

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