Return of Premium (ROP) Rider

With a Term Life Insurance (TLI) policy, you're covered for the duration of the policy, which could be around 10 to 30 years. It gives your beneficiaries a payout if you pass away during the term of your policy. Here, premium payments are low because the coverage your policy offers is for a short time. One of the disadvantages of a term policy is that it doesn't give you your money back if you outlive your term. However, a Return of Premium (ROP) Rider is a good idea if you want your money back from the premiums paid for a Term insurance policy. In this article, we explore what a Return of Premium Rider is and how it works.

A Return of Premium Rider is a unique rider for Term Life Insurance (TLI) policies. This rider gives you the amount of your paid premiums back if you outlive your policy. With an ROP rider, you get life coverage for the term of your policy, along with guaranteed money back (in the form of paid premium) at the time of maturity. However, because the ROP Rider offers you an extra benefit as part of your Term Life Insurance policy, the premiums you need to pay will increase.

Return of Premium Rider helps you add on benefits to your TLI policy. You should identify your goals and your family's financial requirements to find out what plan works best for you. 

Here’s how a Return of Premium Rider works. Let's suppose you are 25 years old and want to buy a Term Life Insurance policy with a Return of Premium Rider. 

Here’s your profile.  

You purchase a term life policy with a Return of Premium Rider and decide that your sum assured is Rs. 50 lakhs according to your current income and family's future needs. 

A Return of Premium Rider ensures that you get your money back on premiums paid. This does not include any interest earned, nor any return on investment, since you're only getting the value of what you paid for in premiums. This rider is a good option if you outlive your plan, so that you and your beneficiaries can still get a cash value. 

If you're considering getting a Return of Premium Rider for your Term Life Insurance policy, you'll need to identify your needs and goals. We've listed a few key pointers to keep in mind when you plan to purchase an ROP rider. 

1. Budget

Because a Return on Premium Rider is an add-on which guarantees you your money back, it will cost a lot more than a regular term insurance policy. 

2. Return on investment

If you're planning to use your Return of Premium Rider as a savings or investment plan, there might be better (higher returns) ways to do so. You could invest in a mutual fund, bonds, or stocks, or even another kind of life insurance policy that has a savings and investment benefit.

Disclaimer: The content on this page is generic and shared only for informational and explanatory purposes. It is based on industry experience and several secondary sources on the internet, and is subject to changes.