Jeffrey Manola is an experienced life insurance agent and the founder of Top Quote Life Insurance. His mission when he created Top Quote Life Insurance was to provide online consumers searching for life insurance with the absolute best quotes for term life insurance, permanent life insurance, no medical exam life insurance, and burial insurance. Not only does he strive to provide you with the ...

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Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products including home, life, auto, and commercial and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, largely in the insur...

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Reviewed by Leslie Kasperowicz
Farmers CSR for 4 Years

UPDATED: Nov 4, 2020

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How would you like to receive all your life insurance premiums back at the end of a policy?

You may think there is no such thing as free life insurance, but what if there was a way you could take out term life insurance and receive your premiums back?

If free life insurance sounds interesting, consider the Return of Premium (ROP) rider.

Looking to compare life insurance policies? We can help. Enter your ZIP code to get free quotes from multiple insurers.

What Is a Return of Premium and Is It Free Life Insurance?

A return of premium rider allows you to have your cake and eat it.

In the 1990s, life insurance companies introduced the unique rider to term policies.

It’s a little like an insurance policy and investment plan rolled into one.

If you die before the term of your policy, your beneficiaries will receive a death benefit.

This is a standard for any life insurance policy. The unique part is, if you live past the policy term, you won’t lose your premiums.

You will receive every penny you paid back.

It can be viewed as a little like free life insurance because all your premiums might be returned to you.

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How Does It Work?

The return of premium rider doesn’t guarantee free life insurance.

Yet, it can provide a return on your policy if you live past the term life insurance policy. Many people often take out a 20 to a 30-year term.

The premium is also available at a higher rate than standard term life insurance. In fact, you may pay almost double the average amount.

So, it’s not free life insurance, as you’ll be paying more and not less than an average policyholder if anything.

The big investment could be worth it if you recover the premiums past the term.

Don’t expect to live off the considerable interest it’s accumulated over the years, though. You also won’t earn any interest on the premiums.

You’ll also have to pay interest on both the rider and the standard term policy.

The insurance company will hold onto your premiums over the course of the term.

If you outlive the policy, you will receive your money back, but you won’t receive any interest.

Yet, you will have the peace of mind that your loved ones are financially protected. Plus, if you outlive the term, you’ll receive every premium you paid in.

You have nothing to lose and your premiums to gain.

Who Should Consider a Return of Premium Rider?

The return of rider is ideal for people of all ages.

Many young families often take out the rider. Why? Because they may view it as an investment in their future.

For instance, if a partner was to die, the other partner and their children will receive the death benefit.

Yet, if a partner was to outlive the policy term, they would receive all their premiums back. So, it is an investment in their financial security, for better or worse.

It’s not only suitable for young families. People who are happy to pay a little more for life insurance coverage should consider the rider.

Whether you’re a student, singleton, or married with no children, it could be a wise investment.

It might be a little disappointing to learn you won’t receive any interest on the premiums. Yet, you might be happier to learn you won’t pay any tax on the returned premiums at the end of the term.

While it isn’t technically free life insurance, it’s as close to it as you can get from a life insurance provider.

How Term Life Insurance Works Without the Rider?

It might help to know how term life insurance works without the rider. This way, you can make an informed choice if the rider is right for you.

Term life insurance is the most straightforward and affordable life insurance coverage options.

The policy will insure you for a select number of years, such as 1, 10, 20, or 30 years.

If you die during the term, a life insurance provider will pay a death benefit to the beneficiaries.

If you outlive the term, the policy will stop and you will not have to pay any more premiums. You also won’t receive one penny of your premiums back.

Many people often take out term life insurance for peace of mind. If a family has to pay for large debts, such as mortgage or credit card bills, they will have financial protection.

For this reason, many homeowners will take out a term life insurance plan for the length of a mortgage.

So, if the worst happens, the family can remain in their home.

While a person is thankful to outlive the term, they may feel as though they have seen no benefit from the insurance.

That’s why a return of premium can be a more suitable alternative. It might not be a free life insurance policy, but it can ensure you receive your premiums back at the end of the term.

It also will not be subject to tax because it isn’t considered an income. It is a refund.

So, when choosing between standard term life insurance and a return of premium, it might be a no brainer.

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What Are the Disadvantages?

As you know, you will pay more for a return of premium rider, and there is no interest on the returned premiums.

The amount you pay will also be determined by various factors. So, it’s important to discuss your options with a life insurance provider.

If you choose to cancel the policy before the term expires, you may receive a smaller refund or nothing at all.

Never view all return of premium riders as the same. Different insurers will have different policies, so read all the terms and conditions.

What to Consider Before Taking Out an ROP?

A return of premium rider might not be right for everyone.

You should weigh up various factors before you make a decision, such as…

The Price

A return of premium rider means you will pay more money for your premiums. The older you are, the more you are likely to pay.

Expect to pay at least 30% more than standard term life insurance premium, if you are young and healthy.

If you are in your 40s or older, and your health isn’t too good, you may have to pay double or triple the average cost.

The Opportunity Cost

The rider can provide a return on your premiums at the end of the policy. That way, you won’t feel like all that money has gone on nothing.

Yet, if you want to make money, it might be best to invest your money elsewhere.

You can always invest in a term life insurance policy. Yet, you could use the money you would have spent on the rider and put it in a separate investment.

You are paying for peace of mind and a potential refund.

Whole or Universal Life Insurance

A term life insurance policy with an ROP might not be the best solution for you.

Instead, you could opt for a permanent life insurance policy, such as whole life insurance or universal life insurance.

Most of the policies offer a cash value component that will grow. As a result, you could cash in your policy for a lump sum in the future.

For this reason, it could be a better investment for your needs.


It’s essential you can afford a term life insurance policy with a return of premium rider.

If you fail to make every premium payment, you will not receive all your premiums back.

Unfortunately, 1 in 14 customers stops paying their premiums each year. This means they will lose their premiums and death benefit.

If you take out a return of premium, you may receive some of the premiums back. This will depend on how long you have been paying into the policy.

Many life insurance companies will not pay a penny if you cancel the policy in the first five years. Yet, this will vary for insurance companies.

The amount you receive may grow by the year. For instance, you could receive 10% back in year 10 of the policy.

Divorce Decrees

In some divorce cases, a divorce decree may require one or both partners to take out a life insurance policy.

A return of premium will enable you to fulfill your insurance requirements. Yet, you will receive a return of the premiums if one of both of you outlive the term.

Buy/Sell Agreements

A return of premium rider can actually be a shrewd business move.

If you’ve committed to a buy/sell agreement with a business partner, the ROP can offer financial security.

The agreement will require you to buy your partner’s share if they were to die first, and vice versa.

If you take out the rider, you’ll have the peace of mind that you will have the money to do so if your partner dies first.


You probably won’t find much closer to free life insurance than a return of premium rider.

It allows you to enjoy the protection of a term life insurance policy, but the potential of a full refund.

Yet, it’s important to remember that the premiums will be much higher than the standard rate. You also won’t receive any interest.

The younger and healthier you are, the better your policy will be. Yet, anyone can invest in the policy, and they will receive a tax-free return should they outlive the term.

Different life insurance providers will have different policies, so make an informed decision when looking for free life insurance.

If you would like to discuss a return of premium rider, don’t hesitate to contact us today.

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