Are you considering purchasing life insurance, but are hung up on the fact that you could pay premiums for decades and then your policy could end with no payout? Of course, you don’t want to die before your life insurance ends—but you also don’t want to feel like you’re wasting money on an insurance policy that goes unused.
That’s why some people choose return of premium life insurance. Keep reading to learn about this coverage!
What is return of premium life insurance?
You may already have a basic understanding of how life insurance works. In exchange for monthly premiums you pay, a life insurance company promises to pay your loved ones a sum of money (known as a death benefit) in the event you pass away during a specified period (known as the term).
Most life insurance policies end when their term is up, and the coverage ends with no payout. But return of premium life insurance is different because it allows you to get back 100% of your premiums paid if you outlive your policy. The return of premium feature is sometimes purchased integrated into a policy, or it’s sometimes added as an optional rider to term life insurance.
The advantages of return of premium life insurance are obvious! There’s no risk of losing money. And even though the cash already belonged to you (it’s not new money), it’s good to know that you have a chunk of savings reserved for the future.
Return of premium life insurance sounds awesome! But what’s the catch?
There’s no catch, per se, but there are a few things you should be aware of when considering return of premium life insurance:
- Return of premium life insurance tends to be more expensive than standard term life insurance.
- If you fail to make payments on your return of premium life insurance policy, or you cancel the policy before the term ends, you may not get a premium refund. Exact rules vary by insurer, so be sure to get the facts before signing on the dotted line!
- There could be more strategic ways to use your money. For example, when you put your money into a return of premium life insurance policy, you lose gains you may have made by investing. Or, your money may serve you better in a permanent life insurance policy that provides lifelong coverage and builds cash value.
The bottom line: Should I get return of premium life insurance?
Let’s circle back to the idea that an unused life insurance policy is a waste. We encourage you to think about life insurance differently! When you have people who rely on you financially, ensuring their financial future is never wasteful.
However, if you can’t bear the thought of spending money on term life insurance that you may outlive, return of premium life insurance may be an option for you. You could also consider permanent life insurance—such as universal or whole life insurance—which provides lifelong coverage and opportunity to build cash value.
Ready to learn more?
Bankers Life is here for you! Our agents can help you determine the best type of life insurance for your unique needs. To get started, find a local Bankers Life agent, who will be happy to answer all your questions.
