What Is Return Of Premium Life Insurance

What is Return of Premium Life Insurance?

Life insurance is a way to give your beneficiaries a secure financial future in the event of your untimely demise. Those who prefer greater flexibility and lower rates will want to consider term life insurance. But what happens when you outlive your term life insurance policy? If you’re interested in term life insurance, but don’t want to outlive your policy and have nothing to show for it, then you’ll want to learn what return of premium life insurance can do for you...

Understanding Term Life Insurance

To really grasp what return of premium life insurance is, you have to understand how term life and whole life insurance work. Whole life insurance means the policy will last for the whole life of the insured. These policies never expire and pay out upon the death of the insured. They typically have much higher premiums than do most term life insurance policies.

Term life insurance policies do have an expiration date. Most insurance companies offer terms as short as one year or as long as thirty. The benefits pay out to the beneficiaries upon the death of the insured. Term life insurance policies usually do have lower premiums than whole life policies offer but, since the term limits mean that the policy can expire, there is the chance that the policy can end before the death of the insured.

With a typical term life insurance policy, this would mean that no benefits are paid and that the insured needs to renew (if possible) or seek new coverage. Many people aren’t satisfied taking a term life insurance policy because it leaves them at risk of outliving its benefit. That’s where return of premium life insurance comes into play.

Return of Premium Life Insurance

Unlike a traditional term life policy, with a return of premium policy the insured doesn’t have to worry about paying for years with nothing to show for it. The insured will receive the premium payment back, should she or he outlive the policy. This doesn’t mean that the beneficiaries will receive the death benefit that would have paid out in the event of the insured’s death, but it does mean that the insured will get the money paid in returned. A return of life insurance policy is therefore typically more expensive than a regular term life insurance policy.

Is Return of Premium Life Insurance Right for Me?

When it comes to picking the right policy for your needs, it pays to do your research. Whole life policies are expensive, but there is the guarantee that the policy won’t expire and your beneficiaries will receive benefits. With a traditional term life policy, the rates are much lower. You also have a bit more flexibility. But if you live even one day past the end of the policy, then your beneficiaries will receive nothing. You could be stuck searching for another policy late in life. Return of premium insurance is much more expensive than regular term life, but you do receive your premium money back should you outlive your policy.