The return of premium life insurance policy is a
term life policy
that guarantees that at the end of the term period you will get back
all of the money that you have paid in premiums.
Let us suppose you acquire a 20 year return of premium life policy. You maintain a level death benefit and you pay a level premium for the 20 year period.
The amount of premium you pay for this policy is more than you would pay for a regular level 20 year term policy.
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It seems to me that the life insurance industry is going around in circles. If my memory serves me correctly the premiums for some
modified whole life policies
and some non participating whole life policies were just a little more than that of a 20 year term policy in some of the
better life insurance companies.
It was argued then that the extra premium that would allow you to get back all you have paid in premiums was not worth it. Only term life insurance made sense.
Who is kidding whom? All this life insurance policy is is a not too low cost policy that will return your money in a guaranteed period. If you doubt this statement suggest to the actuaries that they create a return of premium life insurance policy which will last to age 100 and see how much different that is to the old non par term policies or modified life insurance policies...
Some insurance companies pushed the term policies about 20 years
ago to get themselves into the inner circle of the huge life insurance
companies. It worked pretty well but now they want to get back into the
cash value insurance
They lock in the cash value until the end of the term period with the return of premium life insurance policies. This is a very clever move which will force the policy owner to keep the policy until the end of the term period in order to get back his or her money. Since term life insurance has always had a terrible retention rate this certainly should help.
I am a straight up kind of person and tell it like it is. Plain
term life insurance is good life insurance. I am not too excited about this policy.
Buy a 5 year term, a 10 year term, a 20 year term or a 30 year term policy if term life insurance is your thing, and invest the difference in a mutual fund.
If you want a return of premium pay the extra and buy a universal life insurance policy, a variable universal life or even a whole life policy. You can still get a fairly inexpensive modified whole life policy. Why buy return of premium life insurance?
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I recently did some research on the development of the 30 year term insurance policy over the years. What I learned was quite interesting.
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