ROP Life Insurance--Return of Premium--Is It A Good Idea?

What is ROP Term Life Insurance?

Return of Premium, commonly referred to as ROP within the life insurance industry, is a term life insurance product that will refund all of your paid premium at the end of a given term.  Because of this feature, ROP term life insurance is more expensive than a regular term life insurance policy, and this, of course, is the essence of how it works.

How much more expensive is ROP term life insurance than a regular term life insurance policy?

This is greatly dependent on the length of the term.  For shorter term periods, ROP term life insurance is very expensive compared to regular term life insurance, as much as four times more in fact.  This is because there is less time for the insurance company to recover their investment.  A non-rop term life insurance product, by way of contrast, will be less expensive shorter terms.

So for 15 to 20 year terms, ROP term life insurance is going to cost you at least double if not much more.  For a 30 year term you are going to pay about 35 to 40 percent more. 

Is ROP term life insurance a good deal deal?

If you are a disciplined investor, highly unlikely.  Its strongest appeal is to those who have no grasp of basic mathematical concepts. 

Is it possible to have some premium returned before the end of the term?

Some policies do have such a provision, but there is still usually a very long waiting period before this is allowable.

If ROP term life insurance is such a bad deal, why is it so popular?

Because it is not difficult to see why it would seem like a good deal.  On the face of it, ROP seems like a much better deal than regular term insurance since you with ROP you get to keep all of your money at the end of the term even if you are paying extra.  But money has a time value to it, and the extra amount required for a return of premium term life insurance product adds up to significant amounts of cash over so many years.

Why haven't I heard anything negative about ROP term life insurance anywhere else on the internet?

Most sites that you run in to on the internet these days, especially ones having to do with anything about selling something like life insurance are not interested in presenting you with a full complement of facts about a particular product.  Life insurance is in many cases a good thing to have, but Beyond Quotes is about helping people save money, so we have to basically give a thumbs down to term life insurance.