If you are shopping for term life insurance coverage you may be wondering if you get any money back on your policy should you outlive the duration of your coverage.
It’s a good question and something you should definitely consider.
However, there is NO Money Back on Term Life Insurance policies if you are alive when the policy term ends. This rule applies to all regular/standard term life insurance plans.
NOTE: There is one type of term life policy that does Return Premium.
It’s called Return of Premium Term Life Insurance.
How Does Return Premium Term Insurance Work?
With ROP term life insurance, you pay your premiums for your life insurance coverage for the duration of your policy. Usually you can choose term coverage lasting for a duration of 10, 15, 20, 25 or 30 years.
If you outlive the policy term, the insurance company returns all the premiums you paid, less any fees or expenses. Basically, you get back almost all of the premiums you paid for your coverage.
However, premiums are much higher for this type of policy, compared to regular term life insurance with no return of premiums.
Return premium term life insurance is a new type of term life insurance policy that provides both a death benefit and a return of premium feature within the same policy.
It’s Easy to Understand: If you keep your 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 premium that you paid for the insurance policy.
There's usually some partial return of premium for policies canceled before the end of the term (depending on the year it’s canceled – the longer it’s kept in force, the higher the amount of your return premium).
Return Premium Term 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 term life insurance policies, Return of Premium term life insurance rewards you for living by offering a guaranteed return of most of the premiums paid on the policy during the level term of the policy.
This return does not include any substandard charges (extra charges for health) and rider charges (extra benefits such as disability coverage), if any, which will be paid to the policy owner at the end of the policy period, if the life insurance policy is still in force at that time.
Example of Return of Premium Term Life Insurance
Here’s an Example: Male, age 42 with the best rate of preferred plus, $250,000 of 20-year return of premium term life insurance: Annual premium = $1,000; Return of Premium after 20 years = $20,000 ($1,000 x 20 years = $20,000) 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.
Review of ROP Term Life Insurance Companies
Prudential ("A+" Superior rated)
Assurity ("A-" Excellent rated)
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