Return of Premium Life Insurance: Bridging the Gap

2007-03-08 10:33:40

( Insurance )



RETURN OF INVESTMENT

A return of premium life insurance is a type of life insurance that gives you back the premiums you have paid over the course of the coverage term. Return of premium life insurance guarantees that if you outlive your insurance coverage period you will receive a lump sum which is based on the term life insurance premiums that you have duly remitted.

Return of premium term life insurance is a valid compromise that takes out the unpleasant elements of the two basic types of life insurance. Return of premium term life insurance provides the market with an alternative when none of the two types of life insurance can meet your requirements.

TERM AND CASH VALUE INSURANCE

The first type is the term life insurance plan which provides coverage for a specific period of time. Term life insurance premiums are very affordable and the terms are simple and straightforward. The problem arises when you outlive policy’s coverage period because when this happens the policy lapses and the premiums you have paid are lost.

The second type of life insurance is cash value insurance. This provides indefinite life insurance coverage – the policy is valid as long as the insured is still alive and the premiums you have paid earn cash value over time. The main issue with this type of life insurance is the prohibitive cost. In order for the policy to remain active and keep earning cash value, you have to pay premiums that get higher with time.

Between the high risk of term life insurance and the high cost of cash value insurance, there is a great chasm that is bridged by return of premium life insurance program. Before the introduction of return of premium life insurance program in the market, consumers had no choice but to decide between two extremes that they either do not need or cannot afford.


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