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Insurance policy that offers refund

Posted November 20, 2013 in Advice Column

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.

What else should you consider? With term life, you pay premiums for a certain period, say 20 years, and in exchange, the insurer agrees to pay your beneficiaries a stated benefit if you pass away during that time.

Pros: You’ll receive great value. Term insurance can be purchased in large amounts for relatively small premiums. You can match terms to needs. Once your kids are grown, your mortgage is paid off and your retirement is nicely funded, you may have little use for a this policy.

Cons: The policy is temporary. The benefit may not be paid. Some people chafe at the idea of paying for a benefit their beneficiaries may never receive.

There are many different option in choosing life insurance to protect your family. Learn more about the Return of Premium policy from State Farm®, or contact your State Farm agent for details.

Information provided by Jerry Goebel, State Farm Insurance, 1209 Superior St., Webster City. For more information, call 515-832-4066.





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