Term life insurance offers an affordable way to protect your family, yet this type of coverage does have one tragic flaw. Unlike whole life insurance, term life insurance is only valid for a specific period of time (usually 10 to 30 years). Once the timeline of your policy is over, you no longer have coverage and all your premiums are gone.
Fortunately, it is possible to purchase a specific type of term life insurance coverage that won’t leave you empty-handed when your policy expires. With return of premium (ROP) life insurance, you’ll pay a flat rate for the duration of your policy, but you’ll get all your money back at the end of the term.
Return of premium life insurance policies tend to cost 30% more than traditional term coverage. However, the additional investment in premiums could be worth it if you want your policy to have a built-in savings mechanism that rewards you for your faithful payments later on.
Interestingly, very few companies advertise return of premium life insurance, so you’ll have your work cut out for you if you are searching for a policy. We did the heavy lifting for you by comparing the top providers that offer this coverage and determining which type of consumer each company might work best for.
The 5 Best Return of Premium Life Insurance of 2021
- AAA: Best for High Coverage Limits
- Cincinnati Life Insurance: Best Personalized Experience
- Assurity Life Insurance: Best for Longer Terms
- State Farm: Best for Building Cash Value You Can Borrow Against
- Indiana Farm Bureau Insurance: Best Convertible Coverage
Best for High Coverage Limits: AAA
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AAA
AAA offers return of premium life insurance coverage in amounts up to $5 million+, which makes it a good option for families with considerable income and assets.
Buy term coverage with return of premium in amounts from $100,000 to $5 million+
Choose a term between 15 and 30 years
AAA membership is not required
You have to speak with an agent to get a quote
No additional riders available with this coverage
Health screening will be required
We chose AAA as best for high coverage limits based on the fact that they offer return of premium life insurance coverage in amounts up to $5 million+. Founded in 1902, AAA started its journey by fighting for better roads. This led to the creation of AAA’s auto clubs, which are well known for offering award-winning roadside assistance options. These days, AAA offers a variety of products to its customers, ranging from auto insurance to life insurance and homeowners insurance.
When it comes to their return of premium life insurance coverage, AAA lets you choose from 15, 20, or 30-year terms. No additional riders are available with this type of coverage, but you can purchase up to $5 million+ in term life insurance with the promise of having your premiums returned.
You don’t have to be an AAA member to apply for life insurance with this provider. Note that, once you apply for coverage, receiving it is not instant as there is an underwriting and screening process.
Unfortunately, you will have to answer health questions and you’ll likely need to take a health exam in order to qualify. AAA is also lacking when it comes to allowing consumers to get a free quote online. You’ll have to speak with an agent to apply and find out how much you’ll pay for coverage.
Read the full review: AAA Life Insurance
Best Personalized Experience: Cincinnati Life Insurance
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Cincinnati Life Insurance
Cincinnati Life Insurance stands out with best personalized experience because you work with a licensed agent in your area who can provide you with a personalized, tailored experience without a pressured sales pitch.
Return of premium policies are offered for 20-, 25-, or 30-year terms
Personalized agent experience.
You cannot get a quote without speaking with an agent and providing your personal information
Return of premium is only guaranteed for the base premium of your policy
Medical exam required
While Cincinnati Life Insurance isn’t as well known as some of the providers on our list, this provider can be a good option if you prefer to buy insurance from an agent instead of an online portal. With the help of an agent, you can determine the exact amount of return of premium coverage you need with the ideal term, and you can receive assistance as you walk through the application process. The company prides itself on making sure each new customer has a positive experience with a no-pressure sales approach.
Cincinnati Insurance Companies date back to 1950, and they have grown their influence and financial strength since then. For example, Cincinnati Life Insurance boasts an A+ rating for financial strength from AM Best. Don't let the regional name fool you; Cincinnati Life is available in many places with headquarters in Fairfield, Ohio.
Term life insurance coverage is available from Cincinnati Life Insurance in 10-, 15-, 20-, 25-, or 30-year terms. However, you’ll need to speak with an agent to talk over your options and apply for a quote. Cincinnati Life doesn’t offer any meaningful information on their policies on their website, which makes it difficult for you to shop around.
Best for Longer Terms: Assurity Life Insurance
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Assurity Life Insurance
Assurity Life Insurance is ideal if you want a longer term of 20 or 30 years with return of premium protection to insure yourself in your most vulnerable years.
Pay level premiums for 20 or 30 years, then get your premium payments back if you outlive your policy
Work with an agent who can provide you with a personalized quote
You can convert your policy to a permanent policy during the term period
Shorter term coverage isn’t available if you want return of premium benefits
Not available in New York
Because Assurity Life Insurance only offers return of premium coverage for policies that last for 20 or 30 years, this provider is our top pick for ROP coverage for longer terms. Fortunately, you won’t be pursuing coverage from a fly-by-night insurance provider. With a long history that dates back to 1890, Assurity Life Insurance has stood the test of time. This company also has strong ratings for financial strength, including an A- rating from AM Best.
Term policies from Assurity Life Insurance offer the option to convert your policy to permanent life insurance, which is a major plus. Their return of premium policies also come with a level premium and a guaranteed death benefit your family can count on.
In terms of potential downsides, Assurity Life Insurance only offers two choices of terms for their ROP policies. Also know that you’ll need to answer health questions and pass a medical exam to qualify.
Best for Building Cash Value to Borrow Against: State Farm
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State Farm
State Farm lets you purchase term life insurance coverage with a return of premium benefit, and you get the chance to build cash value you can borrow against in a pinch.
Buy term coverage for 20 or 30 years with return of premium benefits
You have the option to convert your policy to permanent life insurance up until the age of 75
You can apply for a free quote online
Customize your policy with additional riders
Qualify for a multi-policy discount
Only two terms available for policies with return of premium coverage
Not available in Massachusetts, New York, or Wisconsin
State Farm return of premium life insurance policies build cash value you can borrow against, which is a feature frequently attributed to whole life insurance policies. This provider has also been around since 1922, and they have a strong history of financial strength and integrity. While originally started as an auto insurance provider, State Farm now offers more than 100 products and services including homeowners insurance, banking products, investments, and more.The fact that State Farm boasts an A++ rating for financial strength from AM best should also give you peace of mind and provides the kind of stability that makes State Farm best for building cash value you can borrow against.
State Farm is one of the few providers who lets consumers apply for a free quote online. Their return of premium policies are available for 20 years or 30 years, and you can customize them to meet your needs with additional riders for children or waiver of premium in the event of a disability.
According to State Farm, a 25-year-old woman in Illinois could buy a term policy worth $250,000 with the return of premium coverage starting at $49.59 per month, whereas a 30-year policy in the same amount would start at $51.77 per month. Note that State Farm isn’t licensed to sell insurance in Massachusetts, New York, or Wisconsin, so you’ll need to look for another provider if you live in one of these states.
Read the full review: State Farm Life Insurance
Best Convertible Coverage: Indiana Farm Bureau Insurance
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Indiana Farm Bureau Insurance
Indiana Farm Bureau policies let you convert to a paid-up permanent life insurance policy or a partially paid-up permanent policy if you wish. While many providers let you convert term coverage to permanent, Indiana Farm Bureau’s partially paid-up conversion option is unique because you can receive part of your premiums back in cash.
Convert your policy to permanent insurance near the end of your term with no further premiums required
Choose from a 20-year or 30-year term
You cannot apply for a free quote online
Offices are not available nationwide, so you may not be able to meet an agent in person depending on where you live
Medical exam required
Indiana Farm Bureau policies come with some unique options when it comes to converting your coverage. When you buy a return of premium policy and your term ends, you can receive all the premiums you paid back on a tax-free basis. However, you can also select to use your premiums for a paid-up permanent life insurance policy, or you can get part of your premiums back and use the rest to pay for permanent coverage. All of this makes the company our choice for best convertible coverage.
Indiana Farm Bureau Insurance has been around since 1934, so they have a long company history. In addition to life insurance, they also offer homeowners insurance, auto insurance, umbrella policies, and coverage for your business. The company has an A rating from AM Best for financial stability.
In terms of their return of premium life insurance policies, you have the option to buy this term coverage for 20 or 30 years. As a potential downside, you should note that you do have to work with an agent to get a quote for a return of premium insurance policy, and a medical exam will be required.
What Is Return of Premium Life Insurance?
Return of premium life insurance works almost exactly how the name implies. You can buy this coverage in various terms, usually 10 to 30 years, and you’ll pay a flat premium during that time.
But your money doesn’t disappear once your policy duration ends. When your term life insurance policy ends, all the premiums you put into the policy will be paid back to you in a lump sum.
This transforms return of premium life insurance riders into a forced savings product of sorts. You’ll pay higher premiums for this type of coverage than you would for traditional term life insurance, but you’ll have the benefit of getting your premiums back when your policy ends. Also be aware that some return of premium policies build cash value you may be able to borrow against.
Do You Get Your Money Back If You Cancel Return of Premium Insurance?
If you decide to surrender your return of premium life insurance policy before the term ends, you may or may not receive part of your premiums back. It all depends on the insurance provider you select and the terms their policies include. Generally speaking, however, you’re more likely to get your premiums back the longer you have owned your policy. Many providers do not offer any return of premium within the first few years.
How Much Does Return of Premium Life Insurance Cost?
The cost of a return of premium life insurance policy is typically 30% more than traditional term life insurance coverage. However, you do get your premiums back when your term expires, so that doesn’t mean this coverage is a poor value.
That may seem like a big increase, but keep in mind how your policy will play out over 20 years. With traditional term coverage, you would still pay thousands in life insurance premiums over the course of the term, but you wouldn’t have anything to show for it after 20 years.
With a return of premium policy, on the other hand, you would pay more, but you would get all of your money back if you outlive your policy.
Is Return of Premium Life Insurance Worth It?
Only you can decide if paying a higher premium is worth it to get your money back when your policy ends. However, these policies can be great if you don’t mind the extra premium amount and you can afford it.
In some ways, return of premium life insurance is almost like a savings account that comes with free life insurance.
Just keep in mind that you could also pay for a traditional term policy without a return of premium rider and invest the difference instead. This option could leave you further ahead, but you would have to have the discipline to invest the savings instead of spending it elsewhere in your budget.
How much difference could it make? Considering the examples above with a $250,000 policy for 20 years, you could be left with an additional $8 per month to invest if you choose a traditional term policy without a return of premium rider. If you invested $8 per month for 20 years and earned a return of 6%, you would have $3,531.42. That’s more than the difference you would pay between a traditional term policy and one with a return of premium rider ($1,920), but you do have to pay taxes on investment returns, whereas life insurance proceeds are not taxed.
What Should I Do When Buying Insurance?
If you've decided that return of premium life insurance is a good fit for you, the next step is to locate an insurance carrier and policy that suits your individual needs. Finding the right insurance plan will likely require a bit of research on your part.
In addition to keeping an eye out for any potential discounts, you'll need to compare the offerings of different insurance companies to ensure you're getting the best policy for your money. When determining how much money your dependents will need, it's crucial to consider factors like your total debt, how large a payout would be needed to be to replace your current income over a certain period of time, anticipated financial needs like children's college tuition, and if others in your family (such as an income-earning spouse) may also need to be insured.
During a recent interview with Andrew Mais, Connecticut Insurance Commissioner, he said "So, as you go to buy insurance, if you have questions, ask. We've got people who love to talk to you about insurance, which—if you're at a cocktail party—we may not be the people you want to hang out with. But if you're looking for info, you come to us because it's so much easier. We've got publications and info on our websites. This is where I think your state insurance departments are just so strong, so helpful and can do so much for consumers." The National Association of Insurance Commissioners offers a comprehensive map of each state's insurance department contact information.
Most insurance companies require new applicants to chose either "male" or "female" when applying for insurance, and don't always offer an option for those who identify as nonbinary or transgendered. While being nonbinary doesn't disqualify you from getting insurance, you should be aware that most insurance companies haven't updated their underwriting processes to reflect an awareness of gender issues.
How We Chose the Best Return of Premium Life Insurance
Few insurance companies advertise return of premium life insurance coverage, yet we were able to find quality companies that offer ROP insurance with flexible terms. We compared providers in terms of their financial strength and the options available in terms of customizing your policy. We also gave preference to return of premium life insurance that is convertible to permanent life insurance or builds cash value. Finally, we looked for life insurance providers who make it easy to get a free quote online.