Return of Premium life insurance offers the unique benefit of returning premium payments to policy holders who outlive the expiration date of their policies. An added benefit is that the returned premiums are exempt from income-tax, as they are deemed a refund, rather than income. Despite this, ROP polices account for only 5-10 of all life insurance polices written, with the reason largely due to the significantly higher cost.

Typical life insurance policies are sold with a specific time frame in mind, often ranging from 10-30 years. While policies are paid if death occurs within the set term of the policy, those who outlive their policy receive nothing. Return of Premium life insurance, however, offers a refund of the premiums after the policy has expired, which allows policy purchasers to regain the money paid into the policy should they live longer than the length of the terms.

Repayment of 100 of the policy is not immediate, however, and the amount of the refunded premiums is generally dependent on the length of time that the policy is held after its expiration date. It is common to require the policy be held for at least five years after the expiration date to receive even a partial reimbursement of the premiums, with the time required for a 100 repayment generally depending on the term of the original purchase. A 30-year policy, for example, will usually require the policy to be held for 30 years after it has expired to receive a full reimbursement of the premiums.

However, even a partial return of the premiums can be a significant financial help during the retirement years, which is the reason that Return of Premium life insurance policies are gaining favor. That the money is considered a refund, rather than income, also offers the benefit of allowing it the remain tax exempt. Nevertheless, there is a drawback to these policies, and that concerns the cost. ROP policies average about 30 higher than the cost of standard life insurance, and as much as 300 more than many cheap term life insurance policies. This means that while ROP policies allow policy holders to recoup the cost of the premiums in the future, they can be exensive to purchase in the present.

Return of Premium life insurance offers the unique benefit of allowing policy holders to be repaid the cost of their premiums after the term of the policy has expired. An added benefit is that the repayments are tax exempt, as they are considered a refund, rather than income. Premuims are not repaid in full immediately after expiration, and the time required to receive a full refund is usually dependent on the term of policy when it was originally purchased. The biggest drawback to ROP policies is the cost, which is signficantly higher than most typical life insurance policies. The ability to recoup at least part of the premiums is allowing Return of Premium life insurance to gain in popularity, however, with the immediate expense of higher premiums is often considered worth the cost for at least a partial financial return.