Life Insurance Premium Return
Return premium life insurance is a new type of term life insurance plan that provides both a death benefit and a return of premium feature within the same life insurance policy.
How It Works: If you keep your life insurance policy for the full term period, for example 10 or 20 years, at the end of that time the life insurance company that issued the life insurance policy with the return of premium feature returns to you all of the premiums that you paid for the insurance policy, less any expenses.
There's usually some partial return of premium for policies canceled before the end of the policy term (depending on the year it’s canceled – the longer it’s kept in force, the higher the amount of your returned premiums).
Return Premium Life Insurance is aimed at one of the biggest objections to traditional term life insurance policies: "I’m probably not going to die before my life insurance policy expires, and my money will have been wasted." When you buy term life insurance with a return of premium option, you don’t have to waste your money. If you outlive your policy, you get your money back as stated in the policy.
Unlike regular life insurance, Return of Premium life insurance rewards you for living by offering a guaranteed return of most of the premiums paid on the policy during the term of your life insurance policy.
This return of premiums paid does not include any substandard charges (extra charges for health problems) and rider charges (extra benefits such as disability coverage), if any, which will be paid to the policy owner at the end of the life insurance policy period, if the life insurance policy is still in force at that time.
Here’s an Example:
Male, age 40 with the best rate of preferred plus, $250,000 of 10-year return of premium term life insurance:
Annual premium = $600; Return of Premium after 10 years = $6,000
($600 x 10 years = $6,000)
The life insurance return of premium is also income Tax Free.
You pay no income taxes on the return premium because you aren’t receiving back more money than you put into the return of premium term life insurance policy.
The return premium term life insurance policies feature fully guaranteed level premiums for the first 10, 15, 20 or 30 years and in some cases the life insurance can continue to age 95.
One major drawback of Return of Premium Term Life Insurance is the fact that this type of policy has much higher premiums than level term life insurance, which is the most popular type of term life insurance purchased.
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