Purchasing a life insurance policy can offer you peace of mind in knowing that your loved ones will have the financial security they need if you pass away. Any life insurance provider will tell you that you can buy a whole life insurance policy, a term life insurance policy, or a return of premium term life insurance policy, so what are the differences between these options?
While a whole life insurance policy offers you coverage regardless of when you die, a term life insurance policy offers you coverage if you die during the term, which is the specific period of time outlined in your policy. If you don’t die during the term, your coverage ends and you must either purchase a new policy or in some cases, you can negotiate with the insurer to renew your policy. If your policy is a typical term life insurance policy, you will forfeit the premiums you paid when the policy ends. However, if your policy is a return of premium policy, the insurer will refund the premiums to you if you reach the end of the term without collecting on the policy.
There are significant advantages to purchasing a return of premium policy. As stated above, a return of premium policy refunds your paid premiums if you carry it out through the entire term. If you decide to cancel the policy before the term is up, you may also qualify to get a portion of your paid premium refunded. With the refund, you can use to purchase new coverage. Although, return of premium policies have advantages, they also have a slight disadvantage, which is, the premiums you pay may be higher than the premium you would pay for a similar policy that doesn’t have a return of premium. That being said, return of premium policies are a good fit for many buyers. They offer all the security of a regular term policy without the potential for losing the premiums you paid.
Ultimately, it is up to you to choose the coverage that is best for you and your family. Research each option carefully, take your time, and make an informed decision.
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