The return of premium term life insurance policy is one of the more interesting developments in the life insurance industry. The policy idea is pretty revolutionary but there is nothing new about the principle. This return of premium term insurance policy is usually issued for 15 years, 20 years, 25 years or 30 years.
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Return Of Premium Term Life Insurance Explained
- The Old Whole Life Nonparticipating Policies
It used to be that the old nonparticipating whole life policies took approximately 20 years for cash values to equal premiums paid in. Some participating policies took that long as well. This was quite similar to what the return of premium term insurance policy is now attempting to achieve.
The differences were that the premiums were a little higher and you could continue after 20 years if you bought the whole life policies. The term life revolution hit the life insurance business life a storm gone out of control sometime in the early to mid 80’s…
- The Term Life Insurance Revolution
What resulted from the term life insurance revolution was that everyone wanted a 20 year term policy because they felt whole life insurance was a total waste of money. As to the truth of this depends on who is looking at the policies in question.
Term life insurance offered a much lower premium allowing people who could not afford a substantial policy to own one. The problem was that if you didn’t die within the 20 years there was no return of premium. Although this is acceptable for most people there are those who would like to get their money back at the end of the term period.
Although a whole life policy can do that these peoples minds are so filled with dislike of such a policy they will have no part of it. The insurance companies got creative again, as they have many times in the past. Enter return of premium term insurance.
- The Return Of Premium Term Life Insurance Policy
What the life insurance companies did was to charge a little extra for the term policy from the onset. That extra money invested over the years would be sufficient to return the policy owners premium at the end of the term period of 15, 20, 25, or 30 years.
The result is that the premiums are higher than a term policy premium for the same period of time but is lower than a whole life policy. With the return of premium term life insurance policy the life insurance company has given it’s public another alternative.
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