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Return Of Premium

Definition

Return Of Premium (ROP): A rider or provision (commonly added to term life, disability or critical-illness policies marketed in Canada) that obliges the Canadian insurer to refund—without interest and net of any claims paid out—the total amount of base premiums the policy-owner has actually contributed during the chosen term, provided the insured is still living and the contract is still in force and in good standing when the rider’s refund date arrives. The refunded amount is usually paid as a single lump-sum into a Canadian bank account selected by the policy-owner and is treated as non-taxable income under current CRA guidelines. If the rider is surrendered earlier or a claim is made (e.g., an early death on a ROP term-life rider), no premium refund is generated.

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