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What Is Return of Premium Life Insurance? | Quotacy Q&A Fridays - YouTube
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Welcome to Quotacy's Q&A Friday
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where we answer your life insurance questions.
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Quotacy is an online life insurance broker
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where you can get life insurance on your terms.
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I'm Jeanna and I'm Natasha
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Today's question is:
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what is return of premium life insurance?
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If you have a term life insurance policy
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with the return of premium feature
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this means that if you were to outlive your policy
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you get a portion of your paid premiums returned to you.
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If you have a universal life insurance policy with
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the return of premium feature this means that if you
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were to cancel the policy you get a portion of the premiums back.
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Price-wise a policy with the return a premium feature is
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going to be more expensive than a similar policy without.
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For example, Prudential is one of the many
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life insurance companies we work with.
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It's also one of the few that offer return of premium term life insurance.
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If I, a 32-year-old female, ran a quote for a
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$500,000 20-year term life insurance policy from Prudential
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it would be about $27 per month.
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If I instead wanted that same policy but with the return of premium option
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I would be paying about $89 per month.
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Regular term life insurance is the best option for most families
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because of how affordable it is.
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However, if you can afford to regularly pay the higher cost
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of a return of premium policy without fail
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then it's something to be considered.
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There are certain situations in which a return of premium term policy
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may make more sense than a traditional term policy.
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A return of premium policy can be a good choice
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to meet divorce requirements.
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When minor children are involved in a divorce,
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the non-custodial parent is typically required
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to buy life insurance for the benefit of the
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custodial parent and the children.
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A return of premium term policy offers the parent
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the opportunity to fulfill the support obligation
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and get refunded if they outlive it.
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A return of premium term policy can also help parents who want
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to contribute to the child's college tuition.
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If a parent dies during the term,
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the death benefit can insure their child can still afford college.
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If the parent outlives the policy, the refund of premiums
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can go towards paying the student loans.
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A return of premium term policy can also be a
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beneficial strategy in protecting a mortgage loan.
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For example, let's say you have a 30-year mortgage loan
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you could buy a 20-year return a premium term life insurance policy
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and if you die unexpectedly within those 20 years
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your family receives a death benefit and can continue paying the loan.
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And if you outlive the 20-year return of premium term policy
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you can then put that refund of premium
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towards your mortgage loan and get it paid off much sooner.
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This strategy is only wise if you can comfortably afford
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the higher premiums that come with a return of premium policy.
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It does your family no good if you can't afford it long term
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and end up having to cancel the policy.
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A return of premium term life insurance policy
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only returns the premiums if you outlive the policy
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not if you decide to cancel it.
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This is opposite, however, with a universal life insurance policy
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that has a return of premium feature.
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A universal life insurance policy is a type of permanent life insurance
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so there is no outliving the policy.
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This policy lasts until you die as long as the policy's kept active.
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If you purchase a universal policy with a return a premium feature
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you can cancel the policy and receive the premiums back.
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Make sure you read the fine print, however.
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Some universal life insurance policies require the policy
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to be active for a certain period of time before you cancel it
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in order to be eligible to get the refund.
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And sometimes it's only a certain percentage of the premium
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if the policy is canceled early on.
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For example, AIG is one company Quotacy works with
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that offers what is called a guaranteed universal life insurance policy
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with a return a premium feature.
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If you cancel the policy at the end of the year 20,
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you can receive a refund up to 50% of the total premiums paid.
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If you cancel at the end of year 25, you can receive up to 100% of the premiums paid.
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Return of premium life insurance sounds pretty good on paper
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but be sure to really consider the cost when deciding
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what type of life insurance to buy.
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Return of premium life insurance isn't the best choice for everyone.
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And purchasing an inexpensive traditional term policy
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and investing the amount you save elsewhere may be a better option.
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Check out Quotacy.com and an agent can help you
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figure out what type of policy is best for your particular situation.
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Thanks for watching.
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If you have any questions about life insurance,
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make sure to leave us a comment.
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And if you have any questions regarding today's topic,
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check out the blog link posted below.
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And if you're ready to get quotes,
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check out Quotacy.com.
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We're here to help you find the best deal
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on the life insurance you want.
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Bye!
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Thanks for sticking around.
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We'd appreciate it if you Liked the video and
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hit that fancy little Subscribe button to see us every week.
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Bye!
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