Return of Premium
In the past few years insurers have started to offer ‘Return of Premium life insurance’. This insurance is an offshoot of term life insurance (basically straight life insurance protection without cash values or much else in the way of additional features) with one notable exception. Return of Premium life provides the benefit that the insurer will refund 100% of your premiums at the end of the term.
The ‘term’ of the policy is typically 15, 20 or 30 years, though a few insurers are now now offering return of premium life for a 25 year term. This means that for a 30 year return of premium policy, you would need to maintain the policy and pay the premiums for the full 30 years in order to receive your total premium refund.
A couple of caveats about this type of insurance:
First, if the policy is cancelled prior to the end of the term, you will receive a portion of the premiums you paid back, but not 100% of what you paid.
Secondly, you will have to cancel your policy at the end of the term to receive your premium refund. This leaves you the option of choosing between continuing your life insurance and using the return of premium amount to help pay for continuing coverage or receiving cash at that time.
Third, return of premium policies are more expensive than other straight term life policies.
If you don’t like the idea of paying for an insurance policy and getting nothing back if you outlive the term OR if you are not good at saving or investing money on a regular basis, return of premium term could be a good choice for you.