Several years ago I worked with a business owner for whom I had great respect. One particular day I was in the office, she came in talking about estate planning and reported that she and her husband had finally decided to sit down together and plan for both their home and business in-case one or the other died. She said they’d had to look at their net worth and decided to purchase a term life insurance policy and all the associated riders but I don’t remember her mentioning Return of Premium. At the time it was still the early 1990s and Return of Premium was brand new if her insurance company even offered it yet.
She purchased the term policy for 20 years and I’m sure by now, the term has expired. Without a Return of Premium rider, all of the premiums she paid into the policy are gone. She and her husband are retired and enjoying their grandchildren and have probably purchased new policies, but that original policy, which I know was fairly substantial, has expired with no payout. The good thing is they outlived their policy.
Therein lies the benefit of a Return of Premium rider. It allows you to recoup the cost of your term life policy if you outlive the term. Say you purchase a $250,000 or $500,000 term life policy for 20 or 30 years. You pay your premiums monthly and are still living at the end of the term, Return of Premium pays you back all the premiums you paid, tax-free so you can either reinvest in a new policy or as you see fit. You will pay more for a Return of Premium policy, but statistically over 90 percent of people who purchase term life outlive the term of their policies; so it’s likely that you will too. The peace of mind you get from having a term policy you need and being able to benefit either way is priceless. Even if you are one of those 7 or 8 percent who don’t outlive the term, your beneficiary still receives the full amount of the death benefit.
Return of Premium riders are also available on certain other insurances and can be used as savings vehicles in your retirement portfolio. AC Financial Advisers are specially trained in providing financial solutions to meet your specific needs. Call (800) 564-3136 to have all of your questions answered.
