Return of Premium Life Insurance:
Return of premium life insurance is another form of term life insurance. It’s policy lasts for a specific amount of time, then expires. However, return of premium life insurance gives you the opportunity to get your money back when the policy ends, unlike other term life policies.
How it Works
Return of premium life insurance is also known as a rider, or another addition to standard life insurance policies. Generally, this insurance is sold in 10, 20, or 30 year terms. You are required to make annual or monthly premium payments to keep the policy active.
If you die while the policy is still active, a death-benefit will be paid out to anyone you name as a beneficiary. The cost of premiums is dependent on the amount of coverage.
In the situation that the policyholder outlives the policy term, all premiums paid during the term are returned tax-free.
Riders are extra modifications that policyholders can make in order to increase the
flexibility of their policy. Riders are either offered by the insurance carrier for free or for an additional cost.
Some popular return of premium life insurance riders include:
Disability Income Rider
Policyholder is given monthly payments if you become disabled and unable to continue making
an income. As an alternative to full disability insurance, some people choose to add this rider
rather than buying a separate disability policy.
Disability Waiver of Premium Rider
If you as the policyholder become disabled and lose your source of income,
disability waiver of premium lets you skip payment of your premiums until your recovery.
No worries about the policy being cancelled.
Acceleration of Death Benefit Rider
This rider gives you early access to death benefit cash in the event that you become terminally ill.
The benefit can be used to pay for medical care expenses. Being diagnosed with 12 months to
live is generally the terminal prognosis. But some states hold theirs at 24 months.
Best Companies Offering
Return of Premium
The following is a list of companies whose return of premium insurance policies
have been rated A+ or A by the Better Business Bureau and A.M. Best:
Because term life insurance covers your loved ones for a specific period of time while being dependent on your income rather than your whole life, these rates tend to be much cheaper than permanent policies.
Here are some average costs:
$ 100, 000
$ 250, 000
$ 500, 000
$ 1, 000, 000
Alternative Types of
Term Life Insurance
Level Term Life Insurance
A basic version of term life insurance that functions similarly to return of premium life insurance.
However, premiums are not paid back to you at the end of the term. Therefore, this policy is cheaper.
No Medical Exam Insurance
Policies such as Simplified Issue and Accelerated Underwriting allow you
to bypass the medical exam if you are qualified.
Mortgage Protection Insurance
Generally offered in 15 or 30 year increments to mirror your mortgage. Death benefit
decline is matched with the gradual decrease of your mortgage balance.
Other Types of
Permanent life insurance is another main type of insurance policy. Permanent life insurance policies remain in affect for your entire life. Also doubling as a savings account, pay outs are eventually made to your beneficiaries once your life ends.
Like term life insurance, there are several types of permanent life insurance as well, including whole life, universal life, and variable life.
However, permanent life insurance tends to be much more expensive and more complicated than term life insurance, making these policies a bad choice for most people.