In Canada, Life Insurance can be provided, but return-of-premium (ROP) Life Insurance Policies have an attractive feature that classifies them differently from other Life Insurance plans. If the policyholder outlives the term of the policy, he or she receives a full or partial refund of the paid premiums. This is an added encouragement for a person who wants to have a safety net but still wants to recover their money in case they do not need it.
If you decide to get Life Insurance, keep in mind the Return of Premiums option and which are the best policies. In this guide, we will be considering what are considered the top three returns of premium Life Insurance Policies in Canada, including specific unique features, benefits of each of the selected policies, and
What is Return-of-Premium Life Insurance?
Return-of-premium, or ROP, is a term Life Insurance which adds an extra element: if the policyholder outlives the Life Insurance term, then the part of the full premium that he paid during the policy term will be returned. This is called Return of Premium, where, in effect, through its Return of Premium facet, a policyholder effectively gets his investment in insurance back should he outlive the Life Insurance because he doesn’t have to use the death benefit.
For example, ROP policies offer a kind of security for those who wish for a policy that could provide value in case it is not used for its so-called intended purpose, but they differ from traditional term Life Insurance Policies in that a payout is not strictly available only when the insured person dies within the term of a policy. However, these policies are usually more expensive than standard term policies for this added feature.
Why Consider Return-of-Premium Life Insurance in Canada?
The return-of-premium option provides a specific benefit for those who want the comfort of Life Insurance protection but, at the same time, want to see their money returned to them if they didn’t need to cash in the death benefit. Canuks often opt for ROP policies for the following reasons:
- Financial Security: ROP policies provide peace of mind, knowing that if you outlive the policy, your investment is returned.
- Savings Aspect: Many view ROP policies as a type of forced savings plan, as the returned premiums can be used for other financial needs, such as retirement.
- Flexibility and Assurance: Policyholders get the protection of Life Insurance with the added assurance of receiving a refund if they never need to use it.
The 3 Best Return-of-Premium Life Insurance Policies in Canada
Below are three of the most popular and highly regarded return-of-premium Life Insurance Policies in Canada.
Manulife’s Term Life Insurance with Return of Premium
Manulife is one of Canada’s most respected insurance providers, known for its comprehensive Life Insurance offerings. Manulife’s Term Life Insurance with Return of Premium is a popular choice for those interested in the ROP option.
- Key Features:
- Available with term lengths of 10, 20, or 30 years.
- Offers a Return of Premium option if the policyholder outlives the term.
- Provides the choice to convert to a permanent policy before the term expires.
- Pros:
- Flexible Terms: Choose from multiple term lengths to match your financial needs and planning horizon.
- Partial Premium Refunds Available: Manulife offers flexible refund structures, including partial refunds if you decide to terminate the policy early.
- Conversion Option: Flexibility to convert to permanent Life Insurance without a medical exam.
- Cons:
- Higher Premiums: The ROP feature adds to the policy’s cost, making it more expensive than standard term Life Insurance.
- Age Limitations: The Return of Premium feature may not be available beyond a certain age, typically around 65.
Canada Life’s Term 20 & 30 with Return of Premium
Canada Life is another reputable provider offering return-of-premium options. Their Term 20 & 30 policies with ROP are ideal for those who prefer medium-to-long-term coverage with the possibility of a refund at the end.
- Key Features:
- Available in 20- or 30-year term lengths.
- Offers full premium return if the policyholder survives to the end of the term.
- Premiums are guaranteed not to increase over the term length.
- Pros:
- Guaranteed Premiums: Fixed premiums throughout the term make it easier to budget.
- Longer Terms Available: The 30-year term is attractive to younger individuals or families with long-term financial commitments.
- Flexible Payout Options: Canada Life provides flexible options for receiving the return-of-premium benefit, such as lump-sum or staggered payments.
- Cons:
- Limited Term Options: Unlike some providers, Canada Life only offers 20- and 30-year terms with ROP.
- Higher Initial Cost: As with most ROP policies, premiums are generally higher than standard term policies.
Industrial Alliance’s Access Life Return of Premium
Industrial Alliance (iA) offers a unique return-of-premium feature through its Access Life program, which includes options for people with pre-existing medical conditions who might otherwise find it difficult to obtain Life Insurance.
- Key Features:
- Available as a term policy with ROP option.
- Accessible to individuals with health conditions, allowing them to secure Life Insurance with the ROP benefit.
- Comprehensive options for those seeking both Life Insurance and critical illness coverage.
- Pros:
- Inclusivity for Health Conditions: Individuals with medical histories are still eligible for ROP coverage, which is rare among insurers.
- Additional Coverage Options: Access Life includes the ability to add riders, such as critical illness coverage.
- Flexible Terms and Customization: Offers several term options to meet different financial planning needs.
- Cons:
- Premiums Based on Health Status: Due to the accessibility for those with health issues, premiums may vary and can be higher based on health risk.
- Medical Evaluation Required: Some applicants may still need to undergo a health assessment, depending on their specific circumstances.
Comparing the Policies: Key Factors to Consider
When choosing between return-of-premium Life Insurance Policies, consider the following factors:
- Term Length: Choose a policy with a term that aligns with your financial commitments.
- Premium Cost: Evaluate the cost difference between standard term policies and ROP policies.
- Refund Structure: Check whether the refund is partial or full, and if you can receive it as a lump sum or in installments.
- Policy Conversion Options: Some ROP policies offer the ability to convert to permanent Life Insurance, which may be valuable if your needs change.
Who Should Consider Return-of-Premium Life Insurance?
Return-of-premium policies aren’t for everyone, but they are beneficial for those who:
- Desire a Refundable Option: If you want a plan that lets you reclaim your premiums, an ROP policy is worth considering.
- Prefer Long-Term Commitments: If you’re looking to cover long-term needs like mortgage protection or child education,. ROP policies align with these goals.
- Are Comfortable with Higher Premiums: If you can handle higher premiums in exchange for a potential refund, an ROP policy could be ideal.
How to Choose the Best Return-of-Premium Policy for You
To choose the best policy, consider:
- Comparing Quotes: Start by obtaining quotes from multiple insurers to understand premium costs.
- Evaluating Financial Goals: Consider how ROP aligns with your financial plan and savings goals.
- Assessing Health and Age: The younger and healthier you are, the lower your premiums are likely to be for ROP policies.
The End
Some of the best ROP policies with Life Insurance for Canadians looking to refund a policy with some level of Life Insurance with protection include Manulife, Canada Life, and Industrial Alliance. Analyze the characteristics, costs, and benefits of the different policies to determine which will best achieve your financial goal. A return-of-premium Life Insurance Policy is a commitment, but for people who place a premium on the concept of recouping their premiums, it can well be a worthwhile investment in both security and savings.
FAQs: Return-of-Premium Life Insurance Policies in Canada
What is return-of-premium (ROP) Life Insurance?
Return-of-premium Life Insurance is a type of term Life Insurance where the premiums you pay are refunded if you outlive the policy term. This way, you get the protection of Life Insurance and the option to recoup your investment if the coverage is not used.
How does ROP Life Insurance differ from traditional term Life Insurance?
With traditional term Life Insurance, you receive no money back if you outlive the policy term. ROP policies, however, refund the premiums you paid if you outlive the policy, offering a return on the premiums as a benefit.
Are return-of-premium Life Insurance Policies more expensive?
Yes, ROP policies usually come with higher premiums than traditional term Life Insurance because of the additional benefit of a premium refund.
Which companies offer the best ROP policies in Canada?
Some of the best ROP Life Insurance options in Canada are from Manulife, Canada Life, and Industrial Alliance. Each company offers unique terms, features, and benefits that cater to different needs.
What term lengths are available for ROP policies?
Common term lengths for ROP policies are 10, 20, or 30 years. Different providers may offer different options, so it’s essential to choose a term length that fits your financial goals and life stage.
Is it possible to convert an ROP policy to permanent insurance?
Many ROP policies offer a conversion option, allowing you to switch to a permanent Life Insurance Policy without a medical exam. Check with your provider to confirm the availability of this option.
Who is an ideal candidate for return-of-premium Life Insurance?
ROP Life Insurance is ideal for those who want Life Insurance coverage with the potential for premium refunds and are comfortable paying higher premiums for this feature.
Do ROP policies require a medical exam?
Typically, a medical exam is required, especially for policies with larger coverage amounts or if the applicant has health conditions. Some policies, such as those from the Industrial Alliance, may be more flexible, especially for individuals with health issues.
Can I get partial refunds if I cancel the policy early?
Some insurers offer partial refunds if you decide to terminate the policy early, though this varies by provider and the specific terms of the policy.
What happens if I die during the policy term?
If you pass away during the term, your beneficiaries receive the death benefit specified in the policy. The premiums are not refunded in this case, as they are directed toward the death benefit payout.
How can I calculate the cost of an ROP Life Insurance Policy?
Using an online Life Insurance calculator or requesting quotes from multiple providers can help you estimate the cost of an ROP policy based on your age, health, term length, and coverage amount.
Are the refunded premiums taxable?
In most cases, the refunded premiums from an ROP Life Insurance Policy are not considered taxable income. However, it’s best to consult a tax professional for personalized advice.
Can I add riders to an ROP policy?
Yes, some providers allow you to add riders, such as critical illness or accidental death coverage, to customize the policy according to your needs. Adding riders will typically increase the premium.
How can I find the best ROP Life Insurance Policy for my needs?
Compare Life Insurance Quotes Online from reputable providers, consider the term length that matches your financial needs, and assess the premiums you’re comfortable paying for ROP benefits.
What happens if I outlive my ROP policy term?
If you outlive your ROP policy term, you will receive a refund of all or a portion of the premiums you paid, depending on the policy terms.
Know More: Five Smart Ways to Save Money for Your Child’s Education