Return of Premium Life Insurance May Appeal to Many Print

Most Americans know that life insurance is a good idea, especially if they have a family to support. However, many can't get past the feeling that they are throwing away money into a life insurance policy that they may never see a payout from. But many don't know all of their life insurance options, and many don't know that they can get a return of their life insurance premiums with return of premium plans. With annuity life insurance premiums costing more than some can afford, the return of premium option may be a good compromise. Here are the basics of the return of life insurance premium option, and a look at its value.

What is it? Simply put, the return of premium policy states that as long as you pay your life insurance premiums on time every month, your family will receive a payout from the life insurance if you die before the life insurance term ends. If you outlive the term of the life insurance policy (usually 15-30 years, depending on your life insurance premium terms), you will receive a return of all premiums paid into the life insurance plan.

How does it compare to other plans? Return of premium plans are usually more expensive than regular term life plans (as much as 2x more), and slightly less than annuity plans. It is the only option that guarantees a repayment of premiums if you outlive the life insurance plan, but may not give you anything if you cancel before 5 years.

How could it work for you? If you are reluctant to invest in a life insurance plan, a return of premium plan could be the option you're looking for. Assuming that you are younger and in good health, life insurance premiums may not be much more than some short term life plans. Your guarantee to get a return of premiums after 10-30 years will seem like a big payoff to invest in, in your slim chance of dying. Therefore, a return of premium life insurance plan may be the best option.

What are some disadvantages? If you are investing in the return of a premium plan simply to see your premiums returned, you are better off putting your money elsewhere rather than in a life insurance plan. Saving up to $18,000 in life insurance premiums for repayment without interest could be seen as a financial folly. Investing in a higher rate guaranteed CD or bond will make you more money in the long run. For some life insurance policy holders, it costs just a little more to invest in an annuity and get the benefits of a long-term investment and a guaranteed death benefit.

The return of premium product is not for everyone. It is, however, another option for those reluctant to invest in any kind of life insurance. Consider the return of premium options for life insurance plans. These insurance policies give piece of mind for families, without feeling like you're throwing your money away.