Life Insurance Blog

Return of Premium term good deal or a ripoff?
May 27th, 2009
in Life Insurance

Is return of premium term life insurance a ripoff or is it a great deal?  That is a great question and it certainly can be argued both ways.   Return of premium is basically term life insurance that is much more expensive than a regular term policy with the same death benefit.  Usually the premium runs about 50-100 percent higher than regular term.  To collect on the premium return you must live through the entire level term period and then the full premium will be returned.    It seems like a great deal.  It is a great deal, but you must consider a few factors in how good a deal it is.  If you don’t keep the policy for the full term and drop it, you dramatically overpaid for the term insurance.   If you are over 50 the amount you over pay for the term is not nearly as attractive as when you are younger.   The argument against it is that the money returned to you at the end earned no interest and the insurance company held onto your money the whole time and made the spread.

I think overall it is a good deal, since so few death benefits are ever paid on regular term life insurance.  It is important to try and buy the level term period that you are committed to paying for the whole term.   Many of the return of premium plans pay back a percentage of the money paid after a certain number of years.  You may want to look at permanent plans up against the return of premium and compare after 10 and 20 years.

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