What is Return of Premium Life Insurance?

Sep 15, 2022 2 min read

Return of Premium (ROP) is a type of term life insurance, but one with a unique structure. Here’s a breakdown of what ROP is, and how it works.

Most of us know we need life insurance to protect our family’s financial future. Perhaps you only want coverage for a certain number of years. What then? The good news is you have options. Consider Return of Premium life insurance.

What Is Return of Premium Life Insurance?

Return of Premium life insurance is a version of term life insurance that offers you coverage for a set number of years — but with an added bonus. With Return of Premium Life insurance, you gain coverage for a term of 30 years for a level premium payment. The minimum face value amount typically offered is $100,000. If you outlive the level premium payment period, the base policy premiums you paid will be returned to you at the end of the term.¹ If your needs change prior to the end of the level term, you will receive a portion of the base premium back if you cancel the policy early.

What Are the Pros and Cons of Return of Premium Life Insurance?

If you love the idea of having life insurance, but don’t love the idea of spending money on a term policy you may never use, Return of Premium may be the policy for you.

Pro: Lump-sum Payment

The lump-sum received when premiums are returned are tax-free and can be used however you choose. With a traditional term life insurance policy, if you outlive the term, no money is returned.

Pro: Traditional Benefits

If you do pass away during the coverage period, your beneficiaries will receive the death benefit — no premium will be returned.

Pro: Option to Convert

Once you purchase a Return of Premium policy, if you decide down the road you want to convert to a permanent policy like whole life coverage, you may be able to do so.

Con: Higher Cost

It is important to understand that the cost of a traditional term policy is generally less expensive than the payment for a Return of Premium policy. 

Is Return of Premium Life Insurance Worth It?

The short answer: Possibly. The benefit of this type of life insurance is that there’s no risk of losing money because if you outlive your coverage, the base premium you paid comes right back to you. Another reason Return of Premium life insurance might be worth it is because it acts almost like a forced savings account. It’s money that’s already yours, yes, but it’s being stashed away for a future when you’re nearer to retirement.

Find the Right Fit

Life insurance isn’t one-size-fits-all. It’s about providing you and your family with the right financial protection. Work with your local Farm Bureau agent to discuss your individual needs and goals, and review the different options. Get started today!


¹The amount of the lump-sum payment (endowment benefit) is equal to the number of years in the initial level premium period times the base policy premium (excluding any substandard premium, modal expense factors and premiums for riders).

Want to learn more?

Contact a local FBFS agent or advisor for answers personalized to you.