Return of Premium Life Insurance
Return of premium life insurance companies is just like any other type of insurance companies out there. If you are no longer alive, they would pay your family the particular death benefit. However, a return of premium life insurance is actually a policy that has the ‘cash back’ feature and refunds you the premiums you have paid, at the end of the term, if you are still alive. For instance, if you have paid $30,000 in premiums for the period of a 40-year policy, you would be refunded with a lump sum of $30,000 when the 40-year period ends, if you happen to be still around. The refund will be tax-free as well. However, this type of policy can require higher premium payments.
Unlike the classic term life insurance which doesn’t provide a refund and simply cancels the policy if you live through the period of its policy, the return of life insurance allows a person to get his money back after the policy ends, hence being sort of an investment. For this reason, a great number of people prefer the latter one. It could also be a suitable type of policy for seniors who intend to take life insurance for seniors over 80.
A few reasons why consumers prefer the return of premium life insurance are listed below.
- Consumers believe they will live longer than the period of the policy.
- Consumers intend to get their money back, instead of merely paying the companies for as long as they live.
- Consumers take up this policy as a form of investment.
- They payouts on this type of policy are tax-free.
Just like any other insurance policies, this type of insurance policy has its drawbacks as well. Their disadvantages include:
- The return of policy can cost up to 3 times the rate of a basic term insurance.
- It can influence a consumer’s budget in a big way.
- If the policy is canceled halfway through or has payment arrears the consumer may not get the premiums he/she had paid.
- This type of a policy may not be available in many states.
Prior to deciding which insurance policy is the best one to take, it is essential for consumers to consider several factors. Two vital aspects to think about before choosing an insurance policy include:
It is important for consumers to compare the premiums on numerous policies prior to deciding which one is the best. Insurance rates vary from one insurance company to another. Your age, health and policy length will influence the rate of your life insurance policy. Hence, consumers should weigh against each policy to check for the best before taking one.
Some return of premium life insurance companies will forfeit the payments you have made all the while if you happen to cancel the policy halfway through. Eventually, you may not receive the refund. However, there are companies that will refund a certain percentage of the premium paid if there is cancellation halfway through. Therefore, it is essential for consumers to evaluate each policy to see what it offers.
A good research prior to taking an insurance policy will definitely be of great help. With a good research, you as a consumer will be able to provide yourself and your family with the right type of insurance policy.