When it comes to an insurance policy, returning for your premium back is very difficult. Due to the operating logic of the system, it is not possible that the insurer refunds the money which you pay for any insurance. Because even if you have never used your insurance, the working principle of any insurance is that they request money for the protection.
However, if we talk about life insurance, there is an option to break this conventional rule. Return of premium life insurance promises to give your money back you paid during the period if you don’t die during the policy term.
Return Of Premium Life Insurance Pros&Cons
- After your policy period ends, Insurer refunds all the money you pay unlike with regular term life insurance.
- You pay much more premium than a regular term life insurance.
- You generally have to hold the policy for the entire term to get your money back.
- Interest is excluded while you receive your money back.
- This life insurance product is one of the term life insurance policies.
- In order to receive a refund, you need to pay your premiums regularly until your policy period ends. If you cancel your policy before the end of the term, you may not get money back.
- It may be a requirement to purchase a policy with a minimum coverage of $100,000 for using a money-back feature.
- Many of the reputable life insurance companies don’t offer this type of life insurance policy.
How Return Of Premium Life Insurance Works?
This life insurance variety can be purchased for periods of different lengths. In “the return of premium life insurance”, as in other life insurance types, if you die during your policy period, your relatives will receive the death benefit. Besides, After your policy period ends, you will get back all the money you paid for insurance, excluding interest. This refunding isn’t available for a standard term life insurance policies.
Insurance companies do not sell this product to do a favor. The return of premium term life insurance costs is more expensive than regular term life fees.
You may need to pay 3 times more money for a return-of-premium life insurance product compared to a regular term life policy with the same coverage. The amounts you will pay differs depending on the life insurance company. At best, there may be a 30% price gap between two different life insurance policies premiums. We recommend you to consider sensitively before you purchase any life insurance variety. Because you can make more profit by buying a regular term life policy and making the right investments.
Also, The money-back is not taxable in return-of-premium term life insurance.
More About Return Of Premium Life Insurance Works
The return of premium life insurance has a 2% share of all life insurance sales. Due to its premium is expensive, it isn’t the first option among all life insurance products.
We recommend that you read your insurance policy well. Because some insurance companies can use a few tricks to reduce the amount of money they will refund you.
If you want, you can convert your return-of-premium policy to whole life insurance. You can keep your coverage in this way. However, it is not advantageous due to the high amounts you pay. Also, you cannot receive a refund in this case.