Return of premium life insurance is a newly introduced life insurance policy that provides both death benefit protection and a return of premium insurance feature. With return of premium life insurance, if you keep your policy for the term period, at the end of term, the insurance company will return the entire premium that you paid for the policy- not just a portion of it 100% of the premiums you’ve paid. The catch is such policies often have higher premiums than standard term life insurance policies. Return of premium term life insurance is an innovative way to combat the most common reason that people do not choose to buy life insurance. Many do not buy life insurance because they feel that they will only be contributing to the insurance company’s profit and will not get back the money they pay as premium if they do not die during the term of the policy. In fact, it acts as a saving method. If you do not die, at the end of the term, you are repaid the premiums, provided you keep your life insurance with the company the entire term of the policy. As return of premium life insurance is a relatively new insurance product, it is not offered by all life insurance companies.
How do the insurance companies manage this? Simple. When you pay your premiums, they invest this money during the term of the policy. Each time you pay your premium, it gets invested, bringing income into the company. The return from these investments are used to pay you back. Also many policyholders allow their policies to lapse for various reasons. When a policy lapses, all premium paid on that policy is forfeited. The insurance company will also use this money to pay you back. If you are looking to buy a return of premium life insurance, you should shop around to get the best deal. Choose the company that has the best coverage with the most affordable premiums.
The biggest advantage of this type of policy is that it is a forced saving and it returns your money. If you outlive the policy, you will get back all that you paid to the insurance company. The biggest disadvantage is that it costs more than traditional life insurance policies. Also you have to keep your insurance with the same company for the entire life of the policy. Since this policy is not offered by all insurance companies, you have few companies to choose from.
