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I’ve talked in the past about a product called return of premium term insurance. It is often touted as “free life insurance”, because if you outlive the term insurance you get a refund of all the premiums paid in. A little more comprehensive take is in the attached Forbe’s article on the subject.

forbes-return-of-premium.pdf

That is not to be confused with employer offered free life insurance. I always recommend that you take part in any offer of free life insurance to bolster your portfolio. I also always caution against making anything free be the foundation of your life insurance plan. The reason is that, if it’s free, it’s a benefit that can be taken away, or lost if you leave a job. If you counted on that as your foundation, you could be caught in a situation where your family isn’t covered for a while. If your health has changed, you may not be able to get them coverage at all.

I recently structured a program for a company in which each employee was offered the chance to get $50,000 worth of free life insurance. It was owned by the employee and paid for by the employer, so if a person left that job they would have the choice of keeping the insurance simply by taking over the payments.

I was explaining the offer to one of the employees and he indicated he wasn’t interested. When I asked why he wouldn’t be interested in free life insurance he was adamant about the fact that $50,000 wasn’t enough to be of any value, so he would just pass. I still shake my head over that one.

If I was offered $50,000 of free life insurance and my family didn’t need it, I would make the beneficiary of the policy my church or some charitable organization, or perhaps just a friend. $50,000 may not have seemed significant to him, but how many people or organizations would benefit tremendously from a gift that size.

Bottom line. If it’s free, take it! Just don’t put all your eggs in a free basket.