Return of Premium Feature
When you purchase a level-term insurance policy, your family receives the death benefit if you die during the term period. Chances are, however, that you’ll outlive the term period. If your term insurance policy includes a return of premium feature and you outlive the term period, the insurance company will then return to you all of the premiums you’ve paid for the term insurance protection.
- Return of premium term insurance enables you to “hedge your bets” . . . if something does happen to you, you’ve provided for your loved ones. If you outlive the policy, the premiums you’ve paid will be returned to you.
- A return of premium term insurance policy costs more than a traditional level term insurance policy, so it’s important that you understand the conditions under which premiums will be returned to you.
- All return of premium term insurance policies return 100% of the premiums you’ve paid at the end of the term period, assuming the policy is in force and no death benefit has been paid. If, however, you cancel the policy prior to the end of the term period, you may receive back none or only a percentage of the premiums you’ve paid. . . check the return of premium conditions before you purchase a return of premium term insurance policy.
Term Life Insurance Advantages:
- Low initial premium.
- Well suited to shorter-term, temporary needs.
- Most plans can be renewed if you are medically qualified.
Term Life Insurance Disadvantages:
- Premiums in future years may become prohibitively expensive.
- Insurance protection may cease before death.
- Does not build any cash values.
WHOLE LIFE INSURANCE:
- Guaranteed* level death benefit, so long as premiums are paid
- Fixed-level premiums
- Guaranteed* cash values
- May have policy dividends
- Best suited to satisfy the longer-term needs of policy owners who desire guarantees*
Whole Life Insurance Advantages:
- Guaranteed* lifetime insurance protection, so long as the policy is kept in force.
- Fixed premiums can help create the “savings habit. ”
- Cash values are guaranteed*, so long as the policy is kept in force.
- May have policy dividends that can be used to reduce premiums or increase cash values and death benefits.
* Guarantees are subject to the claims-paying ability of the issuing insurance company.
Whole Life Insurance Disadvantages:
- No premium flexibility.
- Guaranteed* cash value growth may be less than could be achieved through one of the other types of cash value life insurance.
- Death benefit may not keep pace with inflation.
* Guarantees are subject to the claims-paying ability of the issuing insurance company.
UNIVERSAL LIFE INSURANCE
- Premiums can be adjusted upward or downward
- Choice of level or increasing death benefit
- Cash value growth is based on a stated fixed interest rate, which may vary over time, but which will never be less than a guaranteed* minimum interest rate
- Best suited to satisfy the longer-term needs of policy owners who want premium flexibility and cash value accumulations that reflect current fixed interest rate returns, with a guaranteed* minimum interest rate
Universal Life Insurance Advantages
- Lifetime insurance protection.
- Premium and death benefit flexibility.
- Cash value growth reflects current interest rates, with a minimum guarantee*.Guaranteed* lifetime insurance protection, so long as the policy is kept in force.
- Fixed premiums can help create the “savings habit.”
- Cash values are guaranteed*, so long as the policy is kept in force.
- May have policy dividends that can be used to reduce premiums or increase cash values and death benefits.
Universal Life Insurance Disadvantages
- Required premiums may increase as the insured gets older in order to maintain needed insurance protection.
- If current interest rates are low, cash value growth may be disappointing.
* Guarantees are subject to the claims-paying ability of the issuing insurance company.
