Who doesn't like a little return on an investment? Not many.
But have you ever thought a term life insurance policy could serve as an investment vehicle?
When you purchase a term life insurance policy, you usually go into it with a few expectations. You are putting the policy in place to provide financial protection in the form of a death benefit toward your family in case you are not around to help provide to pay the mortgage, education and other life expenses associated with having a family.
You're also putting the policy in place with the hope that nothing happens to you during that term so that a death benefit doesn't have to be paid out. What happens if you get to the end of that 20-30 year term and you're still alive and kicking?
Fantastic! Cheers to your health and keep on enjoying your family and letting them enjoy you.
But having paid all that premium to a protection plan and then reaching the end of that period with only the good will you intended might leave you wishing you had put another option in place.
For instance, maybe the option of seeing some of that premium you paid for the term of your policy returned to you. It is possible.
Return of your premium is just that. You paid the premium and at the end of the term, you get what you paid returned back to you. Here's a scenario.
You purchased a 20-year term life insurance policy at $50 per month. That amounts to a total premium paid of $12,000, and a possible amount returned to you at the end of your policy.
How does this happen?
If you contract the policy knowing this is what you want, great. You probably will ask for a policy with the return of premium benefit. If you are currently in a term policy and would like to add this benefit, you can add a rider to your existing term policy.
By doing this, you've created a few good scenarios:
- You've purchased somewhat of a guarantee that you'll see this money refunded
- The refund is not taxable
- You've actually saved some money toward retirement with less cost/lower risk
There is certainly upside to making sure you see that money back, especially now that you are still alive to enjoy it or let it benefit your loved ones.
As in most cases, cost tends to serve as the downer. Yes, for a return of premium policy or rider adding return of premium to a policy, you are going to pay more than what the premium on a traditional term life insurance policy.
Some may look at this extra cost and say, "If I purchase somewhat of a guarantee at a higher cost, could I have invested those additional dollars for a better return?
That's a fair question and certainly the center of the term plus invest versus whole life or permanent life insurance debate. The subject tends to get complicated based on the preferences and opinions of the financial planners, the insurance agents and clients.
The Right Side
At Insurance For Texans, when subject matter gets complicated, we like to slow things down, get back to basics and ask "Who are you as a client and what are you hoping to accomplish?"
Only you know best what you want for your family. Whether you think a regular term policy or a policy which will yield other savings benefits is right for you, we'll ask you the right questions to make sure you have all your bases covered. As an independent insurance agency, we have a lot of options to offer Give us a text, ring or drop us an email.
When it comes to your policy protection, we want you to have confidence the premiums you pay are giving you the best return . . . peace of mind.