Wheeling, IL (PressExposure) October 01, 2009 -- Return of premium (ROP) term life insurance gives consumers the same coverage and peace of mind as traditional term life insurance, but unlike traditional term life insurance, it offers a money back guarantee. This money back guarantee allows consumers to collect 100 percent of their premium payments back if they outlive the length of their policy. AccuQuote, a leader in providing term life insurance quotes to people across the United States, explains how a return of premium policy works and why it is worth considering when shopping for term life insurance.
"Return of premium term life insurance is a unique product in that it offers you a 100 percent money back guarantee if you don't die before your policy expires. However, this type of term life insurance is more expensive than traditional term life insurance, so make sure you can afford it before you make a financial commitment to protect your family," says Byron Udell, founder and CEO of AccuQuote.
Return of premium term life insurance typically costs 25 to 50 percent more a year than traditional term life insurance. The increased premium cost is what guarantees consumers their money back at the end of the term. How does it work? During the term of the return of premium term life insurance policy, insurance companies invest the extra cost of the premium payments for capital growth. As a result, consumers are able to receive a full refund and life insurance companies still make a profit. For example, a 35-year-old healthy male (non-smoker) will pay about $725 annually for a 30-year $500,000 return of premium term life insurance policy. However, if he outlives his policy, he'll get his entire $21,750 back.
According to Udell, consumers should consider these tips when shopping for return of premium term life insurance:
Determine how much coverage is needed - When shopping for return of premium term life insurance, first determine how much coverage is needed. This is the most important part of the life insurance-buying process to make sure a family is adequately insured.
Determine how long coverage is needed - After determining how much coverage is needed, it's important to decide how long coverage is needed. Financial experts recommend purchasing a term life policy that will last children through their college years, or around age 25.
Know what is affordable - Based on how much and how long life insurance coverage is needed, determine if return of premium term insurance is an affordable option. If return of premium term life insurance does not fit within a family's budget, traditional term life insurance is a more affordable option and still offers the same benefits, without a money back guarantee. However, return of premium term life insurance is a great option for those who can afford to pay more now and receive a full refund later.
"The most important thing to be aware of when in the market for life insurance is that your family's protection comes first. Don't be tempted by the words 'money back guarantee' if there's any doubt in your mind that this type of policy is too expensive for your family's budget," says Udell. "If you let a policy lapse due to the inability to pay for it, you risk putting your family in financial danger if you were to die today."