Return of Premium (ROP) life insurance performs like a standard life insurance policy, where you pay money to the insurance company, and the insurance company will pay the full death benefit to your beneficiary(ies) when you die. However, if at the end of the insurance term of coverage, are alive, the insurance company will refund or return all of the premiums you have paid in to the policy. This is on a tax free basis and negates the death benefit. In case you decide to cancel your policy before the end of the specified term, the insurance company will pay back the amount according to the schedule on the contract. That amount will depend on how long the policy stayed in force before the cancellation: the longer – the higher the amount paid.
This type of life insurance is more expensive than a regular life insurance. However, a lot of people strongly believe into it and look at it as buying a life insurance “for free”.