# Return-of-Premium Life Insurance: How It Works and Where to Buy
Return-of-premium (ROP) life insurance combines death protection with a savings component that term life insurance typically lacks. If the policyholder outlives the term, the insurer returns the full amount of premiums paid.
Here's the mechanics. You purchase a 20-year or 30-year term policy. You pay monthly premiums, just like standard term insurance. If you die during the term, your beneficiaries receive the death benefit. If you survive the full term, the insurance company returns every dollar in premiums you paid, tax-free.
The tradeoff is cost. ROP premiums run 50 to 100 percent higher than regular term life insurance. A 35-year-old buying a $500,000 20-year term policy might pay $35 monthly for standard coverage. The same policy with return-of-premium could cost $50 to $70 monthly. Over 20 years, that adds up to $3,600 to $16,800 extra.
ROP insurance appeals to disciplined savers who want to guarantee they won't waste money on life insurance premiums if they stay healthy. It also works for people uncomfortable with investing the premium difference themselves. The downside is opportunity cost. If invested in a low-cost index fund averaging 7 percent annually, that extra premium money could grow significantly more than you paid in.
Several insurers offer ROP policies. Banner Life, Principal Life, and Lincoln National Corporation all provide return-of-premium term options. Availability and pricing vary by age, health, and location.
Ask yourself this question before buying. Do you plan to keep this policy for the full 20 or 30 years? ROP only makes sense if you maintain the policy to term's end. Canc