Term Life Insurance That Returns Premiums Paid?
Actually, YES! Some life insurance companies offer Term Life Insurance with a rider, at an added cost, that will return the premiums you paid if you outlive the specific term (10-15-20-30 years) you chose. It is called, Return of Premium Term Life Insurance, or ROP, for short. In other words, if you outlive the terms of the policy and have paid all the premiums due, your out-of-pocket premiums will be automatically returned to you. It is like, as they say, “having your cake and eat it too”. Interest is not paid on the returned premium, but they are returned tax free. Some exceptions do apply. For instance…
- if you die during the level-premium period, since your beneficiaries will receive the death benefit amount.
- if you take a loan and do not pay it back (the amount borrowed plus interest owed will be subtracted).
- if you cancel your policy before the end of the level-premium period, you may not receive a portion back, depending on how long you have had the policy.
Attractive Equivalent Rate of Return (ERR)
ROP Term Life Insurance offers an attractive Equivalent Rate of Return (ERR). See the example that follows:
As you can see in the above example, the insured had protection for 30 years and at the end of the 30 year period (since he outlived the term and made all the payments as due) he received back all premiums paid, which represented an annual return on his money of 3.83%. Not a bad deal! Also, as with all life insurance products, beneficiaries will generally receive a tax-free death benefit should the insured die before the 30 year period ends.
Downside of Return of Premium Term Life Insurance?
If you cancel the policy before the end of the level-premium period (30 years in the above example) you may, or may not, receive back a portion of the premiums paid, depending on how long you had the policy.
Various life insurance companies offer Return of Premium Term Life Insurance. We can help you find out the one that best fits your personal and financial situation. Click on the link below for ROP consumer brochures of two well known carriers that offer ROP.
Below are links to other Blog Posts that you may want to take a look at:
- 4 ways to save on life insurance
- Affordable Term Life Insurance
- Business Succession and Term Life Insurance
We can help!
The best time to buy life insurance is always TODAY. Tomorrow we will be older and possibly not as healthy as today. As age increases so do life insurance premiums. As health deteriorates, insurance premiums go up. We can help you find the life insurance policy the best fits your personal and financial needs. Contact us at:
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