Term life insurance has been on my mind a while now, and this type of policy — where at the end of its term you get your premium back (if you’re alive, that is) — is news to me, and definitely something to look into further:
Link: Term Life Insurance That Pays You for Living: Return of Premium – March 2007 InsWeb Newsletter.
Return of Premium (commonly known as ROP) policies, while a bit more costly, offer the benefit of returning your paid premiums if you are still living when the policy term is up. They also provide the same benefits of a term life insurance policy; namely offering you the choice of your term length and policy amount.
Not saying it’s good or bad, Ant, but I recently started paying into a “return of premium” life insurance plan. Dawn, my gf (you’ve seen her mentioned numerous times on my site), is of course the sole recipient.
Yeah, I like(d) the idea of getting back, if I’m still alive in 30 years, but it’s not the healthiest investment, if you’re thinking strictly in terms of investing somewhere to make money. Nice bonus for the wife if you go too soon, but if you don’t, you don’t lose too much.
It gives you incentive to keep riding that bike!
That’s similar to what I’d be doing, essentially just making sure that if something happened to me, Jodie was taken care of. The terms, policy type, length and all that are TBD. Not so concerned about making it an investment, but the idea of getting back what you paid in, well, at least off-hand it does sound attractive.
It’s definitely incentive to keep on the bike!
How does the insurance company make money with this kind of plan? I mean, I understand that they will invest the money and keep the earnings while you only get back the principal … but that doesn’t seem enough to make it worth it to the company, since occasionally they will end up having to pay out a huge settlement.
I’ve wondered that too. It must be something with interest earned… and it also depends on what percentage of policies they have to actually pay back the premiums on.