What Is Return Of Premium Life Insurance?

A new addition to the term life insurance family, Return of Premium Life Insurance provides the protection of a death benefit and the return of premium insurance feature. The “return of premium” means you can literally receive the money you paid as premiums back if you don’t use the death benefit.

Most people who consider term life insurance policies get frustrated at the thought of paying their premium while knowing they probably will not die before their policy term ends – and feel as though their insurance premiums were wasted during that time period.

With a Return of Premium Life Insurance policy, you set up a term policy for 15, 20 or 30 years during which time you’re protected with a death benefit if you should pass away during that term. If you do not die during the term of the policy, the insurance company from which you purchased the policy from will return the entire premium you paid for the insurance policy.

If you need to cancel the return of premium life insurance policy before the end of the term has been reached, there is also the possibility of receiving a partial return. The longer you keep the policy and the closer you are to the end of the term, the higher the amount of your return.

Where as policy holders lose their money on a regular term life insurance policy when it reaches the end of the term and the death benefit wasn’t needed – the return of premium term life insurance guarantees that you will receive the total premium that was paid during the time you had the policy. If you are charged extra for health problems or have added a disability coverage rider, the fees paid for these extra options are not returned at the end of the policy term.

An example of a return of premium on a 30 year policy:

Female age 30 purchases a $500,000 term life insurance policy and receives the best rate of preferred plus. If she’s paying $810 per year for the premium, after 30 years she’s paid $24,300 ($810 x 30 = $24,300). At the end of 30 years if she hasn’t needed the death benefit, she will receive $24,300 back as the “return of premium”.

When you receive your premium back on a return of premium life insurance policy at the end of the term, it’s not considered taxable income because you aren’t getting back more than you paid for the policy. Fully guaranteed premium returns are available for 15, 20 or 30 year term policies.