YOU ASK:

Should I buy return of premium term life insurance?

WE ANSWER:

If you are daunted by the fact that most term life policies do not return any premiums to the policyholders who outlive them, or you simply want to save some money, a return-of-premium term life policy might be a good solution for you.

Return-of-premium term life insurance was recently introduced and it quickly became popular because it guarantees the return of all premiums paid if the insured is still alive when the policy term is up.

Pros and Cons of Return-Of-Premium Term Life Insurance

The departure point of return-of-premium term life insurance is that the insured is more likely to outlive the policy. As a "reward", at the end of the period, you receive all the premiums you have put into the policy, in a lump sum that can be used to pay different fees or cover your outstanding debts. This can be seen as another way of saving money.
Furthermore, it makes you feel better for the fact that if you are still alive at the end of the policy, you will get all your money back: an aspect that makes this type of insurance automatically free if the policy is kept in force to the end of the term period.

One of the major drawbacks of return-of-premium term life insurance is that premium rates are usually considerably higher than those of other term life policies. For instance, if a 30-year old woman who has never smoked in her life and is in exceptional health, wants to purchase a 15-year return-of-premium term policy with a face amount of $500,000, she will qualify for a company's best annual rates - which range from $1,095 to $1,275. In comparison, if the same woman applied for 15-year level-premium term life insurance, the annual premiums would be between $190 and $295.
Another disadvantage is that not everybody can afford to keep up with the high premium rates, and some people end up dropping their return-of-premium term policies before the end of the policy period. Although most insurers provide a partial refund in such cases, it usually only includes the base premiums.
Because of the steep prices, a lot of people end up inadequately insured.

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