Term Life Insurance Articles

Are There Ways To Get Your Premiums Back In A Term Life Insurance Policy

2010-01-27

There are some very compelling reasons to buy a term life insurance policy as opposed to some other type of life insurance. Term policies provide great financial security for beneficiaries at typically low rates, which makes them a great choice for working families. They can offer more coverage than other policy types, and they are very easy to set up and manage. Unfortunately, there is one major drawback: they are not a very good investment. This is because the term life insurance premium paid into a policy typically is not returned if the policy holder doesn't die within the term of coverage. The money is simply lost. As such, some consumers opt for other forms of life insurance (or simply avoid buying life insurance altogether). However, there are several ways to recover the premiums paid into a term policy, and every consumer should be aware of these methods before deciding on coverage.

For example, return of premium term life insurance policies are specifically designed to address the concern. In a return of a premium (or ROP) policy, the policy holder receives all money paid into the plan- tax free-at the end of the term, as long as he or she makes all payments on time and the policy is not canceled before its completion. ROP term life insurance quotes are often higher than other forms of term insurance because there is less of a potential gain for the insurance company under this structure. Their profits come from consumers who cancel the plan early and from investments made with the premiums of their customers.

Another way to turn a term life insurance policy into an investment is to purchase a convertible plan. These special policies can be turned into a whole life insurance policy after a certain point. Whole life policies provide coverage along with an investment aspect. Funds can be taken out after a policy holder reaches a certain age (usually 65). A small amount of interest builds after the policy is converted to whole life insurance. Like ROP plans, convertible term life insurance is expensive compared to more common policy types.

Policy holders that want a return on their premiums should look into available options. Contacting several insurers is a great way to learn about the various types of term life insurance in order to find a policy that meets any goals. Any return of premiums will result in higher policy quotes, but the plans are certainly worth the money for many consumers. They are able to simultaneously provide security as well as a viable form of investment, making them a great, safe choice.