What Is Return Of Premium (Money Back) Term Life Insurance?
The majority of people who buy Term Life Insurance outlive their coverage! In fact, according to most life insurance industry statistics, Term Insurance death claims are in the single digits. There is now a term insurance policy that returns every penny of the money that you paid for coverage back to you at the end of the policy term if you are still alive. This policy is called Return of Premium or "Money Back" Term. Instead of just paying premiums you will never see again under a regular Term policy you will receive all of your premium payments in one tax-free lump sum simply for outliving your insurance policy! Let's look at an example: John Montgomery is 38 years old, he has two young children and a wife. His total assets are $1,000,000 and he wants to make sure that if he dies in the next 30 years, his children would be taken care of and his wife would not have to work in order to provide for herself or the children. Normally, John would buy regular Term insurance, but Return of Premium makes much more sense:
Cost per year (30Yr Level Premium Plan) Total cost for 30 years Term Life Annual Cost $1,020 $30,600 Return of Premium Annual Cost $1,860 $55,800 Premium Difference: ($25,200) over 30 years So with the return of premium, at the end of the 30 years, John will receive $55,800 whereas with the regular term policy he would receive nothing. Now let s play devil's advocate against the return of premium policy. Let's say that John decides to purchase the regular Term Life policy and invest the $25,200 difference that he would pay to the insurance company if he purchased the return of premium. Assuming a 5% rate of return, John will make $33,399 over the 30 years so his total future asset value is $58,599 which is only slightly more than he would be getting back with the purchase of a return of premium. BUT John will have to pay tax as a gain on the $33,399 and assuming he's in a 30% tax bracket, he will pay $10,020 in taxes on that gain! This leaves him with $48,579 which is less than the return of premium policy cost of $55,800 which he will get back. Because most people think that they will outlive their coverage, buying term insurance does not seem like a sound financial choice. Most people do not want to waste money on something that they don't think they will ever use. Studies have shown that more than 95% percent of all people in the U.S. who buy Term insurance outlive their policy. This means that there is a 95% chance that the money you spend on Term will have gone to waste. Most people should purchase SOME form of insurance because protecting their family against the financial hardships that would be endured is worth the relatively nominal expense. Return of premium policies last for periods of twenty or thirty years. The longer the policy is in force, the more premiums are returned. Canceling early will give you a percentage of the premiums back (this varies by company). Once the policy's "term" is up, and you receive your premiums back, you have the option of continuing to maintain life insurance coverage by purchasing Whole Life Insurance or Universal life insurance policies. These policies have many tax privileges with the IRS, they offer a competitive guaranteed return via the cash value account, and are creditor proof in most states. The easiest way to protect your family should you pass away prematurely without 'losing' money is a Return of Premium or "Money Back" term life insurance policy. Please call one of our life insurance specialists at (866) 972-
3262 to determine the right kind of life insurance for you and for your family’s financial security or please complete life insurance quote request form now.