Many of our clients want to know about return of premium term life insurance. It is one of the hottest products on the market and it makes a lot of sense. Since only about 2% percent of people ever die during the term of their term life policy, why not recoup the premiums at the end.
The argument for it is that the money that you paid for the term premiums will come back to you 100% at the end of the term period. The argument against it, is that it costs more than regular term insurance does. In most cases at least 50% more than a regular term policy and often more than that. The other argument against it, is that you earn no money on the premiums you paid into the policy and only get the money back with no interest. While I understand this argument, I think it is better to get the money you put in, as opposed to the term policy that expires and you get nothing back. Return of premium basically serves as a forced savings. If you didn’t put the money into the policy, would you have saved it otherwise.
The return of premium option generally is more favorable for a younger person as the increase over regular term premiums are smaller than with older consumers. It never hurts to get a quote for both and weigh them against each other. Depending on your goals and budget, this may be a great option for you.