Return Of Premium Life Insurance

Is Return Of Premium Life Policy A Good Idea?

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In order to appreciate the intent of return of premium life insurance it would perhaps be good to look at some term insurance history. For a very long time term insurance was considered the least attractive of life insurance policies.

People had the tendency to buy whole life or modified whole life policies. They liked the idea of getting back some or all of their money if they didn't die during the time that they had a family totally dependent on them.

About 25 years ago there came into being a kind of revolution. There were powerful campaigns to promote the virtues of the term life policies. These people projected the simple idea that term insurance is cheaper than all permanent policies.

The agents projecting term policies made it their duty to replace as many permanent policies as they could. This was pretty easy to do. All they did was to show how the owners of these existing policies could have the same coverage for much less premium outlay. They could also get the cash values of their policies.

What these agents failed to point out was that when the term policy expired there would be no more life insurance coverage and that they pay not be able to qualify for new insurance, because of ill health, at that time. There was also no cash values to fall back on in case of an emergency.

Then comes what they considered a solution. The term insurance owners would buy mutual funds to build up cash reserves. Then comes the stock market correction of 1986. These people lost their money.

The insurance companies selling term insurance alone come up with what they call return of premium life insurance. The problem with this is that you cannot take out the cash values until the end of the term period. This new policy has a pretty high premium, just a tad lower that the old non par whole life policies.

It would frankly be better to buy the non par whole life policy as the cash value is always there for you. You may take a very long time to break even but the non par policy seems to be a better deal. You can also keep your non par whole life policy until age 100.

If your income doesn't allow you to purchase permanent life insurance now you should buy term insurance now but convert it before the period expires where you can do so.

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