RETURN OF PREMIUM TERM LIFE INSURANCE
The Life Insurance Coverage You Need
All Your Money Back When Coverage is Over
What is Return of Premium Term Life Insurance?
Return of premium term life insurance is a solution for people who need life insurance coverage but are hesitant to buy because they don’t want to spend money on coverage they don’t expect to use.
Where premiums for traditional term life insurance policies are retained by the issuing insurance company should the insured survive the contracts term, return of premium term life insurance pays the policy owner back 100% of the premium they paid during the life of the policy.
How does Return of Premium Term Life Insurance Work?
By paying a higher premium than what is required for a traditional term life insurance policy, the insurance company is able to reduce its risk and earn a rate of return on those additional moneys to offset the cost of providing insurance coverage and generate a profit. If the policy remains in-force the entire term and no death benefit is paid (the insured survives) then the policy owner will receive 100% of the premiums they paid into the policy.
The Opportunity Cost of the Additional Premium Needed to Buy ROP Term Life
The additional premium required to purchase ROP term life insurance has an opportunity cost. Instead of using this additional money to get back 100% of the premiums, you could invest it and earn enough to cover the cost of level term insurance.
A Decision Tree Insurance agent can help you determine the after-tax rate of return you would need to earn on those additional premiums to know your break-even point for buying ROP term life insurance.
Why buy return of premium term life insurance?
A large percentage of term life insurance policies expire without paying death benefits because the insured person survives the term. Many people who believe they should have insurance coverage don’t purchase it because they don’t want to feel they are wasting their money.
Unfortunately, we do not know what the future could hold over the next few decades, and not having life insurance puts families and businesses at risk.
ROP term life is a solution, as it contractually guarantees that if the insured survives the policy term, the insurance company will return 100% of the premium paid to the policy owner.
Should you buy ROP term life insurance?
If you need life insurance and are hesitant to purchase it because you feel you might be wasting money on a policy you will not use, ROP term life insurance is a solution. The policy has a higher premium requirement than regular level term life insurance and does not have a cash value like universal or whole life insurance; though it could have a surrender value if it is surrendered before the term is over.
