Return of Premium Life Insurance: Term Policies With a Money Back Guarantee + YouTube Video
What is return of premium life insurance you are probably asking yourself? Are you tired of spending money on life insurance premiums with nothing to show for it after the term period comes to an end?
With Return of
Premium Life Insurance, you can finally get the peace of mind you deserve and get all your premium dollars back in your wallet.
These impressive term life plans are designed to refund every single premium dollar you pay if you outlive the term period of your policy.
No more worrying about wasting your hard-earned money on life insurance that you probably will never use.
With our agency representing the most competitive carriers, you can trust that you’re getting the lowest premiums possible.
Term life insurance was always known as a “use it or lose it” policy until the insurance industry initiated the Return of Premium Policy designs.
Take control of your financial future and protect your family without losing a single penny. You can now choose Return of Premium Term Life Insurance as an excellent alternative.
Table of Contents
Why Do People Outlive Their Term Period?
The term length that most life insurance applicants choose is many times too short for their actual needs.
Most people outlive the term period of their policies. This is mainly because consumers are like magnets to the lower premiums that shorter term periods offer, such as 5, 10, and 15 years.
Most people need longer-term periods than they choose under normal situations. Years later, their policy terminates, and they need to purchase life insurance once again but now there will be a higher cost due to their advanced age.
When an individual has to re-apply later for another policy, he or she will be rated at their new current age which will become more expensive. Not to mention with age brings on health conditions which will also increase the premium and may even trigger a decline of their application.
This has become a perfect scenario for life insurance companies which enjoy the luxury of short term policy terminations and not having to pay out a death benefit. The statistics show that over 70% of the term policies terminate while the insured is still alive and well.
Return of premium term life insurance policies can put your hard-earned dollars right back into your wallet instead of looking at all those premium payments that go up in smoke.
What is Return of Premium Life Insurance? YouTube Video
How Much Life Insurance Do I Need to Apply For?
How much life insurance you need is an essential question that you have to give serious consideration to. Being over insured will only cost you higher premiums. On the other hand, being underinsured will not give your dependents the protection they need.
The most experienced life insurance experts recommend 7 to 10 times their annual income. In these times of extreme inflation and poor government, the chosen face amount will depend on what the applicant can afford and not based on statistics.
Individual budgets now determine the amount of premiums instead of adhering to general recommendations.
For a budget-friendly approach, I suggest buying only what you can comfortably pay in terms of monthly insurance premiums.
Who Would Be the Best Candidate for Return of Premium Term Life Insurance?
Many people could benefit from these policies but here is a perfect example:
Young individuals in the 20 to 35 year old age class who wish to purchase a term policy for a term period of
twenty to thirty years. When people in this age group purchase a term policy, their chances of outliving the coverage period are incredibly great.
In this age group the premiums are also very inexpensive due to the statistics of surviving the term period is on their side. Life insurance companies offer very low rates which in turn would generate a much lower cost factor for the return of premium riders which will be attached to the policies.
The end result would be many years of having their lives insured with a surefire opportunity to receive all their premiums paid back. Instead of receiving nothing but paid policy statements, they would receive a check paid in full for every dime they spent on their return of premium policy. This would be a win-win situation for the insured.
How Do Return of Premium Life Insurance Policies Reimburse Premiums?
The refund of premiums is accomplished by incorporating a rider into a standard term life insurance policy.
This is easy to understand; purchasing a return of premium life insurance policy gives you the advantage of not losing your hard-earned premium dollars if you outlive your term period. When applying for one of these policies, your agent will incorporate a return of premium rider to the standard base policy.
So for example, if you own an ROP policy and outlive the policy’s term period, you get back all your paid-in premiums, including the cost of the rider returned back to you.
What Kind of Policy Riders Can I Choose?
Many optional riders can benefit from your policy and provide a lot of extra value at a low cost.
The return of premium life insurance policy will implement one rider from the very beginning. This is called the return of premium rider, which changes the functionality of the term policy it is incorporated into. There are several other riders that you can also include in your new policy, such as:
Waiver of Premium Rider:
This is also referred to as a disability waiver of the premium rider in the possible event that you become disabled to the point where you cannot work and ultimately lose your income as a final result. This disability rider will allow you to stop paying your premiums until you finally recover without the possibility of your policy lapsing due to non-payment of premiums. Remember that this type of rider will slightly increase your premiums.
Disability Income Rider:
This is another disability-related rider that will provide you with monthly income payments. This is to replace your recently lost income due to being disabled from your inability to work. This works in the very same way as a disability income insurance policy. This can be easily added to your return of premium life insurance policy as an additional benefit.
Acceleration of Death Benefits Rider:
This option is usually free and built into most good life insurance policies. However, this rider will trigger a cash benefit if you become terminally ill. If so, you can use it for expenses such as medical care costs from your illness.
This usually means being diagnosed with a terminal disease giving you 12 months to live. However, this number can sometimes be as high as 24 months in certain states in the US.
Does a Return of Premium Policy Come With a Greater Upfront Cost?
These policy designs do cost more simply because you have the opportunity to receive every dollar you originally paid. In many cases, these policies can cost approximately 60-80% more than conventional term policies, depending on the carrier you apply with.
If you are relatively young and healthy, the odds are definitely in your favor for outliving your policy term period.
If you purchase your ROP life insurance at a relatively young age, your premiums will be very affordable. Keep in mind that specific conditions can affect your premiums, just as with all life insurance policies, such as:
Your Age:
As with all life insurance products, your age will always play the most important factor in determining your premium. The older you are when you apply, the higher the premium will be.
Health History:
Your current health is one of the life insurance companies’ essential factors. The more medical issues you have, the more likely your rates will either go up or you could even be declined if your condition is serious and life threatening.
Your Occupation:
If you have a dangerous occupation, your rates can be affected. For example, hazardous jobs such as Iron Workers, Commercial fishermen, and Pilots, to name a few, can increase your rates.
Credit History:
If you have poor credit, your rates can be affected. Historically, the statistics show that people with poor credit ratings are more likely to trigger claims. Your credit rating will be taken into consideration for all types of insurance, especially homeowners and auto insurance.
Driving Record:
Your driving record reveals your respect for the law and your degree of responsibility. Unfortunately, statistics indicate that people with poor driving records are more likely to have an auto accident, resulting in a fatality.
Family Health History:
A history of cancer, heart disease, and early death (before age 50) can cause your rates to increase. This pertains to your parents and siblings. The major concern is that these medical concerns can be passed down through your genes.
Policy Face Amount:
The larger the policy death benefit you choose, the more expensive your policy. The longer the term period you choose will also increase your premiums.
Tobacco Use:
Your life insurance rates are sure to increase if you use tobacco products such as smoking cigarettes. Cigarette smokers usually pay about 250% higher premiums. If you smoke, quit as soon as possible because it is a proven fact that tobacco use can ruin your health.
What Are the Best Life Insurance Companies for Return of Premium Policies?
A number of top-rated carriers offer these plan designs. ROP policies can be purchased within a term period of 10, 15, 20, and 30 years. The companies with the most competitive rates are listed below:
1. Cincinnati Life – See Brochure
2. Assurity Life
3. Prudential
4. American General (AIG)
5. Mutual of Omaha
Cincinnati Life, Assurity Life, and Mutual of Omaha usually have some of the lowest premiums on the market for return of premium life insurance. Some of the other life insurance companies do not offer these policies because the profitability statistics are not as good as standard term insurance. In this case, they may have to pay out two ways.
Either by a death claim or by the insured who outlives the policy. Unfortunately, some life insurance companies don’t appreciate the statistics they face for the return of premium life insurance products.
Like any other business, life insurance companies are looking for high profits, and the ROP policies are not as profitable as conventional term policies. A return of premium policy will work great for the owner of the policy and that is what counts.
Are There Any Downsides to R.O.P. Policies?
Some people may not always be able to afford the extra cost of these plans designs. If you die before the term period ends, your beneficiary will receive the designated face amount (death benefit) just like any other policy.
A lot comes down to the value you place on initially paying out more in premiums but having the advantage of receiving all your premiums back later.
The bottom line is if you can afford the additional premium cost. The return of premium life insurance policies can work out very well. When a conventional term life policy terminates, you receive nothing back whatsoever.
When people in the age class of their twenties, thirties and forties purchase term life insurance, their premiums will be extremely low if they are healthy. The ROP plan designs work out great and are very affordable.
How Can I Compare Rates for the Return of Premium Policies?
If you complete the form on the right or use our instant life insurance quoting tool, you will see a drop-down menu option for 15, 20, 25, and a 30-year return of premium plan designs. In addition, you can see just how the cost factor differs from standard term plans.
Getting all your premiums back at the end of the term is a great idea, but it comes at an additional cost and varies with each insurer.
Check and see if these plans fit your budget. If so, you may be able to receive a nice check in the mail someday instead of simply paying out premiums with nothing to show for it in return. But, again, the statistics are in your favor!
Health Questionnaire
If you have any health conditions and would like us to provide you with an accurate rate quote, please complete this simple health questionnaire. Rest
assured that your information is always secure and confidential.
You can either email or fax it back to us and we will be able to provide you with an accurate projection of what your rates will be if you were to apply.
Our Contact Us page contains our email address and fax number. Don’t hesitate to let us know if you have any questions. We are available seven days a week!
Is the Extra Cost of Return of Premium Life Insurance Worth it?
The additional cost of the ROP rider is a debated subject, unless you are on a very tight budget, these plan designs can work out very well,
Whether or not a return of a premium life insurance policy is worth it will depend on your specific financial situation. Receiving a check with no income tax liabilities would be very nice, to say the least, especially if you are at retirement age.
But you have to consider that you are getting back money you already paid into the policy. But, of course, the money was yours, to begin with, and at least your life was insured for that period.
Examples of How These Policies Can be Beneficial
Here is an excellent example to help you understand the benefits of Return of Premium policies:
In this example, we will use a 35-year-old male who applies for a 20-year return-of-premium term life policy with a death benefit of $1,000,000. This applicant could easily have a low base premium of $750.00 per year with many competing companies.
Let’s now go to the extreme to say the additional cost of the ROP rider is the same as the base premium for a total of $1,500.00 per year. After 20 years, our 35-year-old male is now 55 years of age. He has paid $30,000 in total premiums.
The Statistics:
Our example individual is now 55 years old and reviewing the statistics indicates he should be very much alive. If he did not purchase the ROP rider, he would receive nothing but a stack of premium receipts. Due to the fact he bought the return of premium rider, he can expect a nice check in the mail for $30,000 with no tax liabilities attached.
Some people would say he could have invested that extra premium for the ROP rider instead and would be making a nice profit.
“Investing the Rest”
Some people hold the belief that they would rather purchase a conventional term policy and invest the additional savings over purchasing a more costly return of premium policy. The theory of “investing the rest” sounds good, but with most Americans, it normally never happens.
However, if our example had safely invested that extra money in a money market or a CD with today’s low-interest rates, he would be generating less than 2 or 3% interest and then have to pay tax on that money.
Our Final Thoughts
Return of Premium Life Insurance is a great choice but not always the best choice for everyone. Life insurance is not a one size fits all products.
Take your time and understand the many policy designs available to you.
We are always here to answer any of your questions and help you select the best policy for your specific needs and budget.
Feel free to call us seven days a week. We are always here to help you.
All the best,
Jack Venturi
Should you have any questions or need further assistance, please don’t hesitate to call us at 815-390-7545 for a prompt response.
