Welcome to the Complete Guide for Return of Premium or R O P Term Life insurance!
Term Life Insurance provides coverage at a fixed rate of payments for a limited, chosen period of time. The duration of the term can last up to 30 years. If you want to go beyond your term, Extensions of Term Life plans can be very pricey to the tune of 8 to 20 times higher than your original cost. For most people, that is not financially sustainable.
There’s a different twist on Term Life that you may want to know about. It is called an ROP or a Return of Premium Term plan. Just as its name denotes, at the end of an ROP Term policy, all of the premiums you paid are returned to you. The return can be anywhere from 75% to 100% after the completion of the designated term. A 30-year term is going to be your lowest premium price with the greatest amount of return.
So, it is to your advantage to have the longest term possible for several reasons. Most importantly, it will lock in your current health rating for the duration of the term. Next, it will lock in your premium’s current price for the length of your term. Lastly, the cost of your premium is less the longer the term of the policy you choose. Naturally, shorter terms are more expensive.
We usually recommend a 30-year Return of Premium Term Policy. These Return of Premium Term policies are typically referred to as a Simple Issue. Simple Issue means there’s no medical exam and it’s not medically underwritten. It’s a simple issue. So that just means to you that it’s easier to get it and easier to qualify. However, although it’s a Simple Issue policy, it might be required that your agent has you submit to a saliva swab test conducted in their office. They are testing for HIV and other critical or terminal conditions in order to see if you qualify for additional Living Benefits. If you do develop a serious health condition in the interim of your term, you simply need a verification letter from your physician to activate your Living Benefits.
Most ROP policies are double the cost of a Standard Term Life Policy. Other factors that may weigh in are your age. Also, they will want to know if you’re a smoker and your basic health condition. To qualify for an ROP, you need to be in fairly good health. You can’t have more than three active prescriptions. Diabetes is okay as long as you’re not on insulin. You can’t have a permanent disability. You also have to be under the age of 51. Typically the age range for Return of Premium Term policy is 20-50 years of age. You really need to commit to an ROP because you won’t receive any returns until the chosen term is completed.
So you’ve got to choose the best option for you. If you are on a tight budget, you will need the absolute cheapest option available. You might want to choose the leanest Traditional Term policy available based on what you’d qualify for and how much coverage you need.
If you’re over the age of 50 or 60 and you’re looking for the last life insurance policy you’ll ever need, then you shouldn’t be getting a Term Policy. You should be getting a Whole Life Insurance Policy. So, think about this type of policy in terms of lifelong coverage until death.
However, if you are younger, around 20 to 40 years old, the more likely you are going to want a Return of Premium Term Policy.
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