Return of premium (ROP) life insurance is a form of term life insurance in which all or part of premiums paid are returned to the policyholder if they do not die within the life insurance term. The ROP option may be included in an insurance policy by default, or it may be offered by life insurance providers as an optional rider.
As a general rule, ROP life insurance is more expensive than regular term life insurance, with the policyholder paying a higher premium for the same amount of insurance coverage. If the policyholder does not die within the insurance term, the additional premiums are a good investment because the premiums paid by the policyholder are reimbursed. However, if the policyholder does die within the insurance term, the beneficiaries receive the same benefit which they would receive with much more affordable standard term life insurance.
Paying the additional premiums for ROP life insurance can be a good investment for individuals who need term life insurance (to protect their family until the kids are grown or to insure a mortgage or business, for example), but who are in good health and do not engage in dangerous activities. Because the chance of these individuals dying within the insurance term is very low, the chance that they will have their premiums reimbursed is very high.
Return of premium life insurance is not offered in Switzerland. Swiss life insurance providers offer standard term life insurance which protects against financial risks associated with the death of the policyholder.
More on this topic:
Swiss term life insurance comparison
Term life insurance vs. whole life insurance
Term life insurance: 3a vs. 3b
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