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Should I Get a Return Of Premium Life Insurance Policy?
The return of premium life insurance policies is starting to become quite popular. While just a few years ago they were hardly ever heard of. For instance, the Return of premium life insurance policies, like every policy, has its pros and cons.
The affordability and level of coverage you receive from your life insurance policy will vary from company to company. Make sure you’re only working with the top life insurance companies since they are more likely to offer you the most trustworthy protection.
When you’re looking for a term life policy, you have the option to add what is known as a return of premium rider. In fact, this means that the policyholder gets a full refund. This happens when they outlive their term policy.
Many people are hesitant to buy a term life policy. For example, they fear of outliving the term and wasting all of the money they put into it. Therefore, a return of premium policy sounds fantastic at first glance, with all premiums fully refunded.
After running multiple life insurance quotes, the return of life premium term life insurance is significantly more expensive per year. For a 30-year term life policy with a $1,000,000 face value, a regular term life insurance policy costs a little over $700/year in premiums. On the other hand, the same policy with the return of premium rider costs nearly $1,200/year.
This is a 65% increase in price. Although the return of premium policy has the enormous benefit of returning your premiums. Furthermore, experienced investors may be inclined to tell you to go with the regular term life insurance. I also highly recommend investing in the difference.
However, to make that a profitable decision, you would need to get a steady 10% increase in your investments. However, this would prove difficult. In short, a return of premium policy is worth the increase in cost if there is a good chance that you will outlive your term policy.
The price example we gave above was a 30-year term policy. However, the return of premium policies is more popular for shorter policies. This is because the more likely you are to outlive your policy, the more it makes sense to get a return of premium plan.
Therefore, for people in good health that have taken out, say, a 15-year term policy to cover their mortgage, a return of premium policy may be the smartest option. This way, they are covered for the duration of their mortgage. Also, if they outlive their term policy, which is likely, then they are refunded.
Similarly, young couples that want to be covered by life insurance until their children hit adulthood may want to look into the return of premium life insurance. Also for those seniors looking for life insurance over 75, this would not be the plan for them and would not be available.
How To Decide On A Plan
There are many things to consider before deciding on a plan. Below, we’ll list some factors that are relevant to your decision:
- Mortgage — As mentioned above, people often choose the length of their term policy to coincide with the period of their mortgage.
- Budget — You’ll need to know how much you can afford per month. This will help you narrow down your options.
- Children — The age of your children is essential. Most people prefer to have life insurance until their children are no longer financially dependent on them. Therefore, those with a newborn may want a longer life insurance plan than those with a 13-year-old child, for example.
- Your Health — If you are in feeble health, and you are unlikely to outlive your term policy, then it doesn’t make sense to pay extra for your return of the premium policy. If you’re finding it difficult to be accepted coverage, you may want to consider a no medical exam policy.
- Debt/Final Expenses — Remember, without life insurance, your family will have to pay for any of your debts or final expenses. You also might want to replace your income. These calculations will help you decide how much life insurance you need to buy.
If you have any questions, please feel free to contact us at PinnacleQuote (855)380-3300.