Return of Premium Term Life Insurance

Term Life Insurance Advantages and Disadvantages

There are some big advantages to buying a term policy.

Term premiums are generally much lower than whole or universal life insurance premiums.

Because it is cheaper, consumers can afford to buy larger policies.

You do need to understand a couple of basic reasons that temporary coverage will be cheaper than permanent coverage.

Term policies do not grow a cash value. Premiums simply pay for coverage. Once the policy has expired, it has nothing else to offer. The policy holder will not be covered, and they will not be able to exchange the policy for any money.

Term policies are temporary so the insurer is not taking as big of a risk. They underwrite each applicant, and they only issue policies when they expect the applicant to survive. When an insurer accepts a whole life policy, they assume a much greater risk.

Because a policy only provides coverage, and no cash value, it is considered pure insurance. And as the name implies, a term policy, will expire after a certain amount of time. Common terms may be 10,20, or 30 years, but this is still temporary. For these reasons, term coverage provides the advantage of cheaper premiums. A lower price means that consumers can afford to buy larger policies.

Everybody likes to hear that term is cheaper. But consumers should understand that also means that when their policy expires, they will have no value or coverage left. The product has been consumed.

Return of Premium Riders

To make temporary life coverage more attractive to potential clients, top insurers came up with a additional choice that applicants can make on some life policies. This is called a return of premium (ROP) rider. This benefit will cost a bit more every month, but it will return all premiums paid under some conditions.

To Collect the ROP Benefit:

The covered person must survive the policy. In other words, the policy did not pay benefits.

The policy must have been kept in force. For most people, this means that the premiums got paid.

Some riders may also pay out a percentage of the full benefit if the policy is terminated before the end of the contract.

You must check the terms of your specific policy for full details.

How Much will a Return of Premium Rider Pay?

Consider this example. Keep in mind, that these numbers are meant to illustrate ROP riders, and do not apply to any particular policy.

Let us say that Mr. Smith could pay $30 a month for a $150,000 policy which will cover him for 30 years. This would be called a $150,000 20 year term policy. Also assume that he could add the ROP rider for another $5 a month.

If he pays $30 a month for 30 years, his coverage will cost him over $10,000. However he will be a lucky man because he survived his policy!

He could have been just as lucky. He could have paid $35 a month for his coverage and the ROP rider. At the end of his policy, he could get a check back for $12,600. I get this figure by simply figuring out how much $35 a month is when paid monthly over 30 years.

Are you interested in learning more about life policies?

By Marilyn Katz

You Need to Re-evaluate Your Life Insurance

I knew of this older couple, he was in his late 60s and she was in her early 60s....they were not financially saavy and struggled to make ends meet for many years. He was stubborn and usually resisted good advice, like buying life insurance.

Finally, an Agent convinced him to buy as much permanent coverage as he could afford, which at age 68 (despite being healthy) was $20,000...she was uninsurable with heart disease. Three years later (1994), he was diagnosed with a brain tumor and passed away. That life insurance was all the money the widow had, as there was no retirement, no pension, and no savings.

And, for the rest of her life (she lived 6 more years) her 2 oldest children each contributed to paying her rent, assisting with living costs, etc., as she sparingly used the life insurance proceeds to make ends meet...When she passed away, they paid her final expenses.

This story is an example of how life insurance was there at a time of need, however little it was. But it's also a story of an older individual whose age probably led most to believe he was 'all set,' but really was in need of help but didn't have it until it was really too late to make much of a difference.

Don't wait until it is too late. Re-evaluate your Life Insurance position today, and make the necessary arrangements to correct your standing.

This story is close to home because it's the story of my District Manager's parents, and he was the agent who convinced him to buy as much coverage as they could afford when he became an agent back in 1991.

I share this story from time to time, and it's time now. We have a responsibility...call it a burden, to make sure we all have enough life insurance.

By Tim Hawley

What Are the Benefits of Term Life Insurance?

Picking a life insurance policy can be confusing, at first. It can be difficult to determine what kind of policy you need for your situation. Term life is a special kind of insurance offered by most respectable insurance companies.

This type of insurance is much cheaper than typical life insurance and it covers a temporary period of need. This is it's major advantage over other types of insurance. This temporary period of need can range anywhere from 1-30 years, usually in intervals of 5 years (1, 5, 10, 15, 20, 25, 30). Because of this function of term insurance, it is the most cost effective method of life annuity.

Other than the fact that term life is cheaper than regular or whole life, it provides all of the other important benefits of insurance. This means that your beneficiaries will receive a tax-free lump sum payment, should you pass during the specified time period. This lump sum payment, can be used by your beneficiaries in whatever manner they please.

This helps to provide you with a real sense of security because, if something should happen to you, you know that your family will be alright. You don't have to worry that your family will be helpless should you pass away. This really helps to give your family, or beneficiaries, the freedom to accomplish what they would have should you still be around. Your kids will still be able to go to college. Your family will be able to afford a funeral, pay off debts, put food on the table and be able to cover lost wages. They can even take a tropical vacation to take their mind of their mourning, if they choose to.

By Mark Bonham