Life Insurance Premium – Cheaper Is Not Necessarily Better

2007-03-08 10:33:40

( Insurance )



Life insurance is a contract between you, as the policy holder, and an insurance company. Under this contract, the company agrees to pay the face value of the policy upon maturity to your designated beneficiary. In exchange for that undertaking, you agree to make life insurance premium payments monthly or according to a set schedule.

Paying your life insurance premiums can sometimes be annoying. It can seem to be an endless expense, just like an auto insurance premium: you keep paying out money, but unless something happens you never get your money back.

For some life insurance products, particularly term life, you can already purchase a return of premium rider. Term life insurance premiums usually pay for pure insurance only. If you outlive your term life policy, no benefits are paid to your beneficiary and you do not recover anything. But with a return of premium rider, you may recover in full all the term life insurance premiums you paid if you survive to the end of the term.

It is understandable that most people would want to spend the least amount on life insurance premiums. At some point, you may be inclined to purchase term life insurance instead of whole life insurance, because term life insurance premiums are significantly lower.

You should bear in mind, though, that term life insurance provides only death benefits and no accumulation of cash values. The return of premium rider does not quite match the cash values you slowly earn in a whole life policy.

Remember too that term life insurance premiums are likely to increase with your age. Although whole life insurance premium can be higher, the amount is fixed and you are accumulating savings. Though whole life insurance premium is more expensive, you will get more value out of your premium, similar in a way to the adobe creative suite premium.


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