A return of premium life insurance policy is

Return of premium means that the life insurance company will refund you the premiums you paid if you outlive the policy.

Although return of premium life insurance refunds your money at the end of its term, the catch is that it is a lot costlier than a traditional term life insurance policy.

Return of premium is offered by a limited number of life insurance companies. Speak to a life insurance agent to find the best return of premium life insurance companies.

For most people, return of premium life insurance is not worth its high cost. Instead, consider buying a traditional term policy and utilizing traditional investment and savings accounts to build your nest egg.

An insurance policy generally isn’t something you can return for your money back. But there’s one exception: return-of-premium life insurance.

Also known as ROP life insurance, this type of coverage reimburses you for the money you paid in premiums if you don’t die during the term. Some insurers offer it as a stand-alone policy, though it’s most commonly sold as a rider that can be added on to a life insurance policy.

This list focuses on return-of-premium policies that are sold separately. To narrow down the list, we looked at coverage amounts, term lengths and state availability, as well as insurers’ financial strength and reputation among customers.

Our picks for the best return-of-premium life insurance companies

All of the companies listed below scored at least 3 out of 5 stars. While return-of-premium is an uncommon product, it’s a good idea to compare life insurance quotes from at least two companies before making a decision.

4.5

NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account consumer complaint and customer satisfaction data.

4.0

NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account consumer complaint and customer satisfaction data.

3.0

NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account consumer complaint and customer satisfaction data.

How we ranked the top life insurers

NerdWallet’s life insurance ratings are based on consumer experience, complaint index scores from the National Association of Insurance Commissioners for individual life insurance and weighted averages of financial strength ratings, which indicate a company’s ability to pay future claims. Within the consumer experience category, we consider ease of communication and website transparency, which looks at the depth of policy details available online. To calculate each insurer’s rating, we adjusted the scores to a curved 5-point scale.

These ratings are a guide, but we encourage you to shop around and compare several insurance quotes to find the best rate for you. NerdWallet does not receive compensation for any reviews. Read our editorial guidelines.

Best return-of-premium life insurance policies: Pros and cons

Learn more about our top ROP life insurance companies in August 2022 by reading the summaries below and checking out our comprehensive reviews.

State Farm: Best for earning a discount

4.5

NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account consumer complaint and customer satisfaction data.

Policy name: Return of Premium Term Life.

Coverage amount: $100,000 to a variable limit.

Term lengths: 20 or 30 years.

Pros: State Farm ranked No. 1 for customer satisfaction in J.D. Power’s 2021 U.S. Individual Life Insurance Study.

Cons: Not available in Massachusetts.

Open to those from 18 to 60 years old, State Farm’s return-of-premium life insurance policy offers coverage starting at $100,000. Depending on your age, you can buy a policy lasting 20 or 30 years. If you’d like to convert your policy to permanent life insurance, you can do so before you turn 75.

State Farm allows you to add children’s term life insurance to your policy, as well as a waiver of premium rider, which pauses your premiums if you become disabled and can’t work for a period of time. If you have a State Farm auto insurance policy, purchasing a ROP policy with the company may earn you a discount on your car insurance premiums.

Cincinnati Life: Best for transparency

4.0

NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account consumer complaint and customer satisfaction data.

Policy name: Termsetter ROP.

Coverage amount: $25,000 to a flexible limit.

Term lengths: 20, 25 or 30 years.

Cons: Not available in New York.

Available in 20-, 25- and 30-year terms, Cincinnati Life’s Termsetter ROP policy can be customized with multiple life insurance riders. These include an accelerated death benefit rider that allows you to tap into your policy’s payout while you’re still alive if you’re diagnosed with a terminal illness. You can convert all or part of your coverage to permanent life insurance after your 70th birthday. The insurer doesn’t list a maximum coverage level; rather, the amount of coverage you can buy depends on your age and the reason for purchasing a policy.

Cincinnati Life stands out for giving applicants access to their underwriter via phone or email, which is a rare offering. Typically, underwriters work behind the scenes and don’t communicate with customers directly, so this access is helpful if you have questions after you’ve submitted your application. Some ROP applicants are eligible for accelerated underwriting, and the insurer is lenient toward non-cigarette tobacco users when it comes to setting rates.

Illinois Mutual: Best user-friendly policy

3.0

NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account consumer complaint and customer satisfaction data.

Policy name: Path Protector Plus Return of Premium Term Life Insurance.

Coverage amount: $50,000 to $500,000.

Term lengths: 20 or 30 years, or to age 65.

Illinois Mutual’s return-of-premium policy is straightforward. If you’re 18 to 60 years old, you can buy up to $500,000 in coverage, and add an accelerated death benefit rider to your policy.

It’s quick and seamless to get a quote online, and agents are available for follow-up questions.

Companies that offer return-of-premium riders

These companies allow you to add a return-of-premium rider to specific policies. You can expect to pay higher premiums if you opt in to this coverage.

Company and NerdWallet rating

Policies eligible for ROP rider

4.5

NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account consumer complaint and customer satisfaction data.

4.5

NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account consumer complaint and customer satisfaction data.

20- or 30-year term life insurance.

4.5

NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account consumer complaint and customer satisfaction data.

Some hybrid life insurance and long-term care policies.

4.0

NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account consumer complaint and customer satisfaction data.

3.5

NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account consumer complaint and customer satisfaction data.

15-, 20- or 30-year term life insurance.

2.5

NerdWallet's ratings are determined by our editorial team. The scoring formula takes into account consumer complaint and customer satisfaction data.

Accidental death benefit insurance.

How does return-of-premium life insurance work?

When you buy a stand-alone return-of-premium life insurance policy, you’ll select a term length, such as 20 or 30 years. If you die during that time, your life insurance beneficiaries receive the death benefit. But if you don’t, you’ll get a refund of the premiums you paid, without interest — though your insurer might subtract the cost of administrative fees and similar charges. The money you get back isn't taxable, as it’s simply a refund of the payments you made.

To compare, with regular term life insurance, you won’t receive any money if you’re still alive when the policy expires.

ROP life insurance is an interesting product because it’s a term life policy, but it builds cash value over time. Once you’ve accumulated enough cash value, you can borrow against your policy, withdraw the money or surrender the policy for cash if you no longer need coverage.

What’s the catch with return-of-premium life insurance?

The money-back feature comes with a higher price tag. Let’s say you’re a healthy 40-year-old looking to buy a 20-year, $500,000 policy. You can expect to pay nearly five times as much for a return-of-premium policy compared with a standard term life insurance policy without ROP benefits.

Sample rates for return-of-premium life insurance

These are sample rates for a 20-year, $500,000 return-of-premium life insurance policy for super preferred applicants. These are nonsmokers in excellent health.

Source: Quotacy. Rates are for Cincinnati Life and are valid as of August 3, 2022.

ROP life insurance pros and cons

Premiums are reimbursed if you outlive the policy.

It’s more expensive than regular term life insurance.

Refunds aren’t taxed as income.

If you’re late paying premiums and your policy lapses, you might not get any money back.

ROP policies usually build cash value.

Is return-of-premium life insurance worth it?

It depends on your budget and how you’re fitting life insurance into your overall financial plan.

For most people, a standard term life insurance policy is sufficient. With this approach, you could put the money you don’t spend on a return-of-premium benefit aside into a high-interest savings account, or invest it. If you don’t spend the money and simply let it grow, you’ll likely end up with more money at the end of your policy’s term due to the interest you earn.

If you’re not comfortable with the idea of paying into a life insurance policy that may expire and you can afford the pricey premiums, consider ROP. Just be sure to pay your premiums on time and avoid canceling your policy, as you might not get your money back.

Insurer complaints methodology

NerdWallet examined complaints received by state insurance regulators and reported to the National Association of Insurance Commissioners in 2018-2020. To assess how insurers compare to one another, the NAIC calculates a complaint index each year for each subsidiary, measuring its share of total complaints relative to its size, or share of total premiums in the industry. To evaluate a company’s complaint history, NerdWallet calculated a similar index for each insurer, weighted by market shares of each subsidiary, over the three-year period. NerdWallet conducts its data analysis and reaches conclusions independently and without the endorsement of the NAIC. Ratios are determined separately for auto, home (including renters and condo) and life insurance.

What is a return of premium insurance policy?

Is a return of premium life insurance policy a variable life?

When full premium is returned to the insured it is called?

Is a return of premium taxable?