Die or Get A Refund
Thursday, May 24th, 2007Would you like Term Insurance that refunds your money if you don’t die? Well now you can—it’s called Return of Premium Life Insurance. One of the biggest objections to buying term life insurance is that people see themselves outliving the specified term and often think of the premiums as wasted money. The insurance industry has answered that objection with the recent introduction of Return of Premium term life insurance.
Return of Premium or ROP combines the benefits of traditional term life insurance with a return of premium feature. Simply put your family receives a lump sum death benefit if you die, otherwise if you win your bet with the insurance company and you live the insurer returns all your premiums. This money-back guarantee can be particularly comforting for those that believe death will not occur during the term of coverage.
What’s the catch? Well it does come at a cost. Since the insurance company is obligated to pay you back at the end of your term, Return-of-Premium life insurance does cost more than regular term insurance. A typical ROP policy may cost approximately 25 percent to 50 percent more than standard term life insurance. And policies typically have to be held for the 10 to 30 years to receive a return of all premiums, though many insurers offer a pro-rated return if held for a few years. In some cases taking the extra premiums that would have been paid and applying them to a disciplined investment approach may provide more flexibility.
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