Term Life Insurance Quotes
One of the benefits of a permanent life insurance policy (whole life or universal life) is that, in addition to providing a death benefit, it can also accumulate a cash value, which can be accessed in later policy years.
Term life insurance, on the other hand, provides only a death benefit. For those who don’t want permanent life insurance and don’t want to pay years of term life premiums without any return (if one outlives the policy), there is a solution.
Return of premium term life insurance is term life insurance with the added benefit of a return of all premiums paid at the end of the policy term, provided you outlive the policy.
This benefit, however, doesn’t come without a cost – these policies are more expensive than traditional term life policies. For those in their twenties and early thirties, the added cost of these policies might not be too significant; therefore, this might be an excellent option for this group.
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For people older than this group, the difference between this type of policy and regular term is often great enough to make this product a not-so-attractive option.
If you don’t survive the policy, it will do as it was intended to do – pay off the mortgage so your family won’t have to worry about continuing the mortgage payments.
Is Return of Premium Life Insurance Better Than Whole Life?
At LifeInsure, we’re strong believers that term insurance may be the best life insurance for the majority of people. It offers an appropriate financial safety net at a budget-friendly cost and is clear-cut, so you understand precisely what you’re getting. We also feel that return of premium life insurance is a policy that some people should consider.
Return of premium life insurance might be a good term life insurance option for some people. Return of premium does just what it declares: when the term of the insurance policy is complete, all the premiums are returned to the insurance policyholder. It’s more costly than a conventional term life policy because it comes with a money-back guarantee.
Another well-known alternative is whole life insurance, a form of permanent life insurance that remains in force for as long as the insurance policyholder pays his or her premiums. It’s also more costly than term life insurance —by a significant amount.
Individuals who may want more than a standard term life insurance policy understand that both of these are more expensive and contemplate, “If I’m paying much more, why don’t I simply get the policy that will last my whole lifetime? Whole Life looks like the better choice!”
But a return of premium policy might be a better purchase for somebody wanting to get additional value for the price.
Return of premium and whole life policies aren’t just different for the sake of being different. They both have benefits – or at least perceived benefits – and negative aspects in comparison to conventional term life insurance.
Return of Premium Term versus Whole Life
The most significant benefit to buying a return of premium life insurance policy is stated in the product name: you receive all the premiums back at the end of the term.
Many people are convinced that life insurance is a misuse of money if it will never pay out, that they have put significant money into something and didn’t deliver something tangible in return. This is the wrong way to think about it for three simple reasons.
- First, it means you outlived your insurance policy, which is awesome.
- Second, you did obtain something: peace of mind that your personal obligations
would be taken care of after you’re gone.
- Finally, without life insurance coverage, you’re presuming that nothing terrible will happen to you or, at the very least, your family would be able to handle all expenses without your salary contribution. Those are both huge assumptions.
A return of premium insurance policy can allow an insured person to feel much better about their investment by providing a monetary return if they outlive the insurance policy – a win-win. It’s money you’ve actually paid and not “brand-new” money, but it can be an attractive boon in your retirement to get a major sum of money returned (like an extreme version of finding five dollars in a jacket pocket).
Whole life, on the other hand, will last for as long as you pay your premiums. That can offer a feeling of ease that you will always be protected, and your beneficiaries will receive something, no matter how long you might live.
The cash value component of whole life also functions as a mandatory savings vehicle. Over time the insurance company reduces its commitment to cover your death benefit as your cash value increases and subsequently becomes large enough to cover the whole death benefit payout.
Potential drawbacks of Return of Premium Term
Of course, as with almost everything, there’s an additional side of the coin, and there are a few drawbacks to both of these insurance policies that term insurance doesn’t have.
At the end of a 20-year term, that’s an additional $16,800. If you invested that money in a retirement plan or mutual funds, you could have multiple times that dwarfing the total you “saved” by getting the premiums paid back.
Return of Premium Case Example
A very healthy 30-year-old male considering a 20-year, $500,000 return of premium insurance policy can buy it from AIG starting at about $91 a month. A female in very good health can buy it for about $75 a month. Similar policies for a man and woman from Prudential Insurance Company would cost about $101 and $88 a month, respectively.
Frequently Asked Questions
Term Life Insurance Quotes
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