Term Life - Return of Premium

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills.
Post Reply
Topic Author
airahcaz
Posts: 1525
Joined: Sat Oct 31, 2009 3:37 pm

Term Life - Return of Premium

Post by airahcaz »

Anyone hear of this and how does it work besides the obvious title?

New! Return of Premium
Payback 100% of paid premiums when yououtlive initial rate guarantee period
1) Invest you must 2) Time is your friend 3) Impulse is your enemy 4) Basic arithmetic works 5) Stick to simplicity 6) Stay the course. (Plagiarized, but worth stealing)
dhodson
Posts: 4117
Joined: Mon May 24, 2010 3:03 pm

Re: Term Life - Return of Premium

Post by dhodson »

I'm pretty sure whitecoatinvestor.com has a blog on it

IF you pay all the premiums on time without fail then at the end of the term you get your money back. This looks good who don't understand the time value of money. The premium is not the same as your regular term. Its much higher. You pay for your term insurance by the interest they make on the money and the fact that some people aren't on time for a payment or lapse bc it is higher than regular term. There is no magic here. You are still paying for there term insurance and possibly a lot more if you aren't careful and don't realize what you could have done with investing that money.
User avatar
gasdoc
Posts: 2039
Joined: Mon Nov 03, 2014 7:26 am

Re: Term Life - Return of Premium

Post by gasdoc »

airahcaz wrote:Anyone hear of this and how does it work besides the obvious title?

New! Return of Premium
Payback 100% of paid premiums when yououtlive initial rate guarantee period
If it is cost competitive with a traditional term life policy, fine. If it costs more, stay with regular old, tried and true, term life insurance from a solid company.
curmudgeon
Posts: 2630
Joined: Thu Jun 20, 2013 11:00 pm

Re: Term Life - Return of Premium

Post by curmudgeon »

Sounds like a new coat of paint (deception) on some variant of whole life.
dhodson
Posts: 4117
Joined: Mon May 24, 2010 3:03 pm

Re: Term Life - Return of Premium

Post by dhodson »

It isn't whole life. It is its own thing. Many folks never make it to all payments on time bc they forget to pay on time, don't have the funds, need a different insurance policy bc of other changes. The sucker part is thinking its free insurance. Nothing is given away for free with this. In this low rate environment, its even typically a worse deal.
niceguy7376
Posts: 3007
Joined: Wed Jul 10, 2013 2:59 pm
Location: Metro ATL

Re: Term Life - Return of Premium

Post by niceguy7376 »

It is not whole life. I did get quotes when I was looking for term life as well. For example, if for say 500K and 30 year term life, the monthly premium is $25.

If we pay $25 per month for 30 years and we dont use it, then we get nothing in return.

The return of premium quote was at $45 per month.
If we pay $45 per month for 30 years and we dont use it, they said they will return the $45*12*30 back to us.

I was not interested and went for basis term life.
mikep
Posts: 3855
Joined: Wed Apr 22, 2009 9:27 pm

Re: Term Life - Return of Premium

Post by mikep »

niceguy7376 wrote:It is not whole life. I did get quotes when I was looking for term life as well. For example, if for say 500K and 30 year term life, the monthly premium is $25.

If we pay $25 per month for 30 years and we dont use it, then we get nothing in return.

The return of premium quote was at $45 per month.
If we pay $45 per month for 30 years and we dont use it, they said they will return the $45*12*30 back to us.

I was not interested and went for basis term life.
Make sure to pay annual. The monthly rates have an insane APR similar to that of credit cards.
wolfeman
Posts: 19
Joined: Tue Aug 13, 2013 10:30 am

Re: Term Life - Return of Premium

Post by wolfeman »

niceguy7376 wrote:It is not whole life. I did get quotes when I was looking for term life as well. For example, if for say 500K and 30 year term life, the monthly premium is $25.

If we pay $25 per month for 30 years and we dont use it, then we get nothing in return.

The return of premium quote was at $45 per month.
If we pay $45 per month for 30 years and we dont use it, they said they will return the $45*12*30 back to us.

I was not interested and went for basis term life.
Are these actual quotes?

$45x12monthsx30 years = $16,200

Plugging these numbers into a financial calculator, the extra $20 per month has to earn 4.8% per year to equal $16,200 after 30 years. Which is very doable on your own. And you avoid the risk of missing one single on-time payment to the insurance company and receiving nothing at the end.
dhodson
Posts: 4117
Joined: Mon May 24, 2010 3:03 pm

Re: Term Life - Return of Premium

Post by dhodson »

wolfeman wrote:
niceguy7376 wrote:It is not whole life. I did get quotes when I was looking for term life as well. For example, if for say 500K and 30 year term life, the monthly premium is $25.

If we pay $25 per month for 30 years and we dont use it, then we get nothing in return.

The return of premium quote was at $45 per month.
If we pay $45 per month for 30 years and we dont use it, they said they will return the $45*12*30 back to us.

I was not interested and went for basis term life.
Are these actual quotes?

$45x12monthsx30 years = $16,200

Plugging these numbers into a financial calculator, the extra $20 per month has to earn 4.8% per year to equal $16,200 after 30 years. Which is very doable on your own. And you avoid the risk of missing one single on-time payment to the insurance company and receiving nothing at the end.

You will find the quotes are even now lower given the low interest rate environment.
dhodson
Posts: 4117
Joined: Mon May 24, 2010 3:03 pm

Re: Term Life - Return of Premium

Post by dhodson »

Also keep in mind the companies that do this aren't exactly offering the cheapest term so comparing it to their straight term product isn't a good comparison

http://whitecoatinvestor.com/return-of- ... qa-series/
niceguy7376
Posts: 3007
Joined: Wed Jul 10, 2013 2:59 pm
Location: Metro ATL

Re: Term Life - Return of Premium

Post by niceguy7376 »

My term life quotes were done 4 years back. They are not actual quotes but just provided as an example of what i remember then.
Also, I went for the annual payment plan. Ins companies provide the monthly premium plan so that some people would not be shocked at premiums when looked at monthly basis than at yearly basis.
dhodson
Posts: 4117
Joined: Mon May 24, 2010 3:03 pm

Re: Term Life - Return of Premium

Post by dhodson »

niceguy7376 wrote:My term life quotes were done 4 years back. They are not actual quotes but just provided as an example of what i remember then.
Also, I went for the annual payment plan. Ins companies provide the monthly premium plan so that some people would not be shocked at premiums when looked at monthly basis than at yearly basis.
Exactly its just like car buying. They tell you what you can afford a month but don't tell you how much more this affordable plan costs you.
bberris
Posts: 2412
Joined: Sun Feb 20, 2011 8:44 am

Re: Term Life - Return of Premium

Post by bberris »

It sure looks like whole life to me. It has a savings account built in. Its just that the return is 0 % on the savings part, and there is a severe penalty (100 %) for lapse. In return, the cost is not as high as "whole whole" life. It could be called "Half-Life".
dhodson
Posts: 4117
Joined: Mon May 24, 2010 3:03 pm

Re: Term Life - Return of Premium

Post by dhodson »

bberris wrote:It sure looks like whole life to me. It has a savings account built in. Its just that the return is 0 % on the savings part, and there is a severe penalty (100 %) for lapse. In return, the cost is not as high as "whole whole" life. It could be called "Half-Life".
If you are going to say that then term is just whole life with a zero percent term after you take into consideration the cost of the insurance (COI is also deducted from WL "savings").

One can call it whatever but you can't keep it in force your entire life so id align it more with term personally.
Post Reply