A Disability Return of Premium (ROP) Rider is an optional add-on to a disability insurance policy that provides a refund of premiums paid if the insured does not experience a disability during the coverage period. The ROP rider is designed to address the concern that if an individual pays premiums for years without ever becoming disabled, they will have paid a significant amount of money with no benefit.
Here are some key features of the Disability ROP Rider:
Here's an example of how the Disability ROP Rider works:
Suppose John purchases a disability insurance policy with a 10-year term and adds the ROP rider to the policy. The policy has an annual premium of $2,000, and the ROP rider adds an additional 25% to the premium. After 10 years, John has not become disabled and has paid a total of $22,000 in premiums ($2,000 base premium + $500 ROP rider premium per year). Because John has not experienced a disability during the coverage period, he is eligible for a refund of a portion of his premiums, which may be up to 100% of the premiums he paid.