For example, a healthy 25 year old, non-smoking  male will pay as low as $360 annually for a 30 year level-term policy from an A-rated company.  He will pay as low as $625 for a 30 year return of premium policy, about 75% higher than a level term.  Why would someone pay this much more for this type of policy?  Simple math will tell you that at the end of the 30 years, if you survive the policy (which is a good thing), you will be out of pocket $10,800 for the term policy.  On the other hand, if this same person had purchased this regular term policy, he would have received $18,750 at the end of the term.

But you say you could purchase the term and invest the difference ($265 annually) and do better than this?  Maybe you can, but you would have to earn 5.08% annually to beat these numbers.  Do you have confidence you can earn that much on your investment, especially in these uncertain financial times.

Now, as you get older, the difference in cost between the two is greater, so you would have to evaluate whether or not it makes financial sense for your situation.  For example, a healthy, non-smoking 40 year old male would pay as low as $621 for a 30 year level term insurance policy, whereas he would pay as low as $1370 for a 30 year return of premium term life insurance policy.  If you purchased term and invested the difference ($749), you would have to earn 3.65% annually to get back the same $41,100 you would have gotten back from the return of premium policy after 30 years.

To get quotes for both term life insurance and return of premium term life insurance, click the Start Your Instant Quote button above

The original type of mortgage life insurance followed the amount of the mortgage balance so, as your mortgage obligation decreased, so did the amount of insurance. Today it usually makes more sense to get mortgage life insurance equal to the original mortgage amount but instead of a decreasing amount of insurance, you simply get the most inexpensive level term insurance.

Recently it has become popular to buy return of premium term life insurance policies for mortgage term life insurance. The reason this type of insurance is used is that currently traditional mortgage life insurance rates are not as competitive as most term life insurance rates. and with return of premium, if you keep the policy, you get all the payments paid back to you.

The most affordable is the level premium, level benefit term life policy. This type of insurance can be purchased for a period of time such as 30 years, 25 years, 20 years etc. The policy amount is guaranteed not to decrease and the premium can be guaranteed for the full period of time.

Traditional mortgage protection life insurance is occasionally still marketed by banks and some agents but it may make more sense for you to get an insurance policy:

• with guaranteed lower rates than a mortgage life insurance policy.
• that will pay off your mortgage in case of your death.
• with an insurance amount does not decrease.

To get a mortgage life insurance quote or an instant life insurance quote for other needs, contact us or call us at 866-691-0100.

Protecting your Mortgage with Return of Premium Life Insurance

As I mentioned earlier, another method that’s becoming more and more popular for mortgage insurance is Return of Premium Term Life Insurance. This type of life insurance is term insurance with the added and unique benefit that when you keep it for the full term (20 years, 30 years) you get all your premiums back, tax free!

Using this method, the insurance will be there to pay off your mortgage but in the likelihood that you live and you keep the policy, the insurance company guarantees to return all the money that you paid on the policy and since it’s considered a return of what you put in, it comes back tax free. This kind of mortgage term life insurance can be more appealing since it is likely that you will live to the end of the term period.

This money that comes back to you on a return of premium life insurance policy is money that you can use to enhance retirement, take a trip you dreamed about or just enjoy any way you please.

Learn more about types of life insurance or get an instant life insurance quote online.

How does return of premium life insurance work? When you buy term life insurance you get a low premium for a number of years. If you outlive the term insurance your money is gone. What return of premium term life insurance does is give term life insurance for the period of time (15, 20 or 30 years) and if you keep it for the entire term period the insurance company returns all of your premiums paid.

How and why does an insurance company do this? First of all, the premium paid is more expensive than term life insurance policy for the same period of time. Also, not everyone keeps their policies so the insurance company has received more money than a regular term policy and keeps that, which helps them pay the people who do keep their return of premium policies. Also, whole life or universal life has cash value that is like a return provision along with other advantages and disadvantages. The biggest advantage is that a whole life policy is guaranteed to last for life. Also, it can build large cash values and the interest growth is tax deferred.

The biggest disadvantage – it’s a lot more in initial cash outlay than term insurance and more than return of premium life insurance.

One way to calculate if return of premium is worth it is to take the premium for a return of premium policy and compare it to the cost of a term life policy for the same period of time. Take the difference paid per year, compare it to the value returned to you at the end and do a calculation for the rate of return on that overpayment. You can see a Forbes article on return of premium to see how that would work out.

One warning: If you’re not very sure that you can keep the policy I wouldn’t get a return of premium policy or a permanent life insurance policy such as whole life or universal life insurance.

Here’s how it’s done: The premium for a return of premium term life policy is higher than the amount you’d pay for just term life insurance for the same period of time. Because the life insurance company has charged more than they need to pay for claims and expenses the balance can be invested by the insurance company.

The insurance company actuary (an insurance accountant) takes into consideration the amount of interest that the company can make during the period on the excess premium. Also, some people, because of circumstances, may not keep their policies and will therefore not get the refund. Their excess payments go back to the company. Because they don’t keep their policy and you do, that helps lower what the insurance company charges. It’s interesting that the refund you receive at the end of the term is tax free since it’s equal to what you put in.

One piece of advice I’d give on return of premium is similar to advice on whole life insurance: Don’t get it unless you’re very confident that you’ll be able to keep the policy until the term period is up. If you’re not that sure, then go with a traditional term life insurance policy.

If you’re not aware of it, it overcomes one of the objections to term life insurance which is the pure cost (no return) of term life insurance.

If you keep the return of premium policy you get all the premium you paid in back to you at the end of the term period. That’s the good news. The bad news is if you don’t keep it, you overpaid for your term life insurance. Not a bad deal – if you keep it.