In life insurance, ROP stands for Return of Premium.
A return-of-premium feature is most commonly associated with term life insurance. If the insured outlives the policy term and satisfies the contract conditions, the insurer returns some or all of the premiums paid. Depending on the product, the feature may be built into the policy or offered as an optional rider. It does not usually mean that premiums are returned whenever a policyholder cancels early.
Return-of-premium coverage is different from ordinary term insurance. Standard term insurance normally provides a death benefit during the selected term but builds no cash value and returns nothing when the term ends. ROP policies generally cost more because the insurer promises a refund if the insured survives the term.
The refund is also not automatically an investment profit. The policyholder has paid higher premiums and has had money tied up for years, while early cancellation may produce no refund or only a reduced one. ROP should not be confused with “rate of premium,” “rider on policy” or “reduction of premium”; those phrases do not supply the established meaning of the abbreviation.