It’s always a good feeling for me when I do a project around the house and end up not needing everything I’ve purchased. Well anyway, it beats the feeling of coming up short and having to make another trip to the lumber yard or hardware store. At least this way when I make the trip I get my money back for the unused merchandise.
Return of premium term insurance does the same thing. If you don’t use it you get a refund. And since you can’t use part of your term insurance policy, it’s not a partial refund……you get the whole thing back. It’s better than a home project!
Return of premium term insurance may not be the right fit for everyone, but it is an option your independent life insurance agent should always throw on the table. It answers the most common objection to term insurance, that being that you have somehow wasted all that money if you outlive your term. That need to somehow avoid wasting money drives a lot of people to buy much more expensive universal life or whole life policies just to ensure that the policy will outlive them. The downside to that idea is that then you have purchased a policy that is substantially more expensive and will likely outlive your need for the insurance.
Remember, term insurance is bought when we can determine the point at which we will no longer need the coverage. So, if I buy a $500,000 policy to cover the years when my child is growing up, once that child is grown and no longer dependent on me, do I want to continue to pay premiums on a permanent policy, or would I feel better about getting a refund on the term insurance I had but didn’t use. Worth thinking about!
Now, no games here. Return of premium term does cost more than straight term insurance. So, weigh the pros and cons. Crunch the numbers. There isn’t anything inherently wrong for paying for protection you don’t use. It’s peace of mind. If you can’t quite feel that peace, look at return of premium life insurance.
This post is somewhat dated. Life insurance underwriting is changing and evolving continually. For more updated information check out some of the key word links. If you have a specific question or topic you need information for do a search. If you don’t find the answers you need contact me and we’ll make sure you get the information that is important to you.