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Life insurance that can refund money

Posted October 16, 2013 in Advice Column, Windsor Heights

You carry life insurance to protect the ones you love from financial hardship if you should die. But what if that policy could refund money to you and your family while you’re alive?

That’s the premise behind Return of Premium life insurance. Here’s what to know about this coverage.

What is Return of Premium life insurance?
Return of Premium life insurance is a term policy with a level premium period of either 20 or 30 years. At the end of the term, if the death benefit has not been paid and you’ve made regular premium payments, you’ll be refunded the money you’ve paid during the level premium period less any loan and accrued loan interest on the policy.

The return of premiums typically amount to tens of thousand dollars — and you can use that money however you wish.

What are the benefits?
In addition to the protection that the policy affords your loved ones:
•    The money you get back from a Return of Premium policy is generally tax-free.
•    You can use the refund any way you choose — to help pay off a mortgage, fund college tuition, boost your retirement savings or something else.
•    During the level premium period, your policy will build cash value, and you can borrow against that during the initial term period.
•    The death benefit of your policy is generally income tax-free.
•    If you have one or more other policies with your insurer, adding this coverage may make you eligible for discounts.

Information provided by Matt Cale, State Farm Insurance, 6733 University Ave., Windsor Heights, 280-9000.

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