When choosing life insurance, many people prefer ‘Term Life’ insurance over ‘Permanent Life’ insurance. The biggest attraction for term life insurance is that it is very straight forward, and the premiums are much cheaper than permanent life insurance. All you have to do is make sure you keep the premiums paid and you are covered.
If you’re not completely sure what term insurance means, then to put it simply, it is a life insurance which solely covers death benefits and which is only payable if you die during the life of the policy. It is called ‘term’ because the premiums are guaranteed to stay level for a specific period of time such as 10, 20 or 30 years for example. You are the one who decides on how much you think you need for the amount of death benefits, and which period of time or term that you want be covered.
What is Return of Premium?
The drawback with a term life insurance policy is that when you come to the end of the term, you have spent a lot of money over the life of the policy. You have nothing to show for it at the end except for a dent in your bank account. Many life insurance companies have come to understand this drawback and now offer a ‘rider’, which is an add-on insurance benefit you can opt for known as a ‘Return of Premium’ rider.
What a return of premium rider offers is that it will pay you back all the premiums you have paid during the life of the term policy at the expiration of your term life policy. This includes the premiums paid for the base term policy as well as the additional premium for the rider… 100% is returned to you. The more you pay in premiums, the more you get back at the expiration of the policy.
Return of premium is often available on term policies between 15 and 30 years length. Quotes are not typically available for 10 year term.
7 Benefits of a Return of Premium Rider
What can you use this money for? Let’s look how you can benefit from the return of premium rider on your term life insurance.
1. Return of Premium is not Taxable
That’s right! The premiums you have paid come back to you tax free. The government can’t touch this money and it’s all yours. You can use it to take that dream holiday, pay for home improvements or sock it away to feather your nest egg when you retire.
2. Pay for your Children’s Education
You might have bought your term insurance to last until your children have grown up and are ready to leave the nest. The day has come and they’re ready to go to college or a university. We all know how expensive tuition is these days. Maybe you have tried to save up for a college fund but will you have enough to help out the kids? Think how convenient it will be when you get this chunk of change back into your pocket, and how much you can now lessen the financial burden of a college education.
3. Buy that Dream Cottage or Second Home
Just about everyone has passing thoughts of that getaway place in the country or on a lake where you can kick back and relax. Or, maybe the real estate market is just right for you to invest into a second home and make some money down the road. Either way you have to come up with the scratch as a down payment. A return of premium can give you exactly what you need at the right time. Whether it’s a cottage or second home, real estate is an investment everyone is interested in because it’s a relatively sound investment.
4. Help the Grand Kids
If you bought your term life insurance in your latter years or a longer term policy, you might have grandchildren that are just coming into their prime. They could be preparing for college or might have just gotten married. You could use this return of premium to give your grandchildren that extra bit of help that could make all the difference to their just starting out and making their way in the world.
5. Pay for your Hobby or Trip
Ever want to go and golf those courses you’ve seen on television, sail around the world, or take that cruise on the seven seas? We all do, but it costs money and may simply not fit in the budget. A return of premium could provide you with the cash to achieve those dreams and make it a reality.
6. Pay off the Mortgage
If you’re homeowner, you probably often fantasize how nice it would be to pay off that mortgage - to finally own your home and not be beholding to the bank anymore. You might just be able to that with return of premium life insurance. Even if the amount you get back doesn’t fully cover the mortgage, you can still use it to pay down a big chunk off the principle, save a bunch of interest, and be that much closer to paying off the mortgage.
7. Use as Business Bonus
Many business people buy key person insurance for partners, or vital people who are key to the success of their business. Often, they opt for term insurance to provide for this coverage. If you offer the return of premium as a bonus payable to the key person who was insured, they will have a higher incentive to stay with your company and keep it prosperous.
To get started with a return of premium quote, fill out the form to the right, or call us at 877-996-9383. Any time you’re considering a term policy, you should always at least ask for a quote on return of premium. It might only cost 30 to 50% more than the base policy, making it a great deal.