Most of us buy life insurance to protect our families in case we die. But even we buy a term policy that that will last for decades; we do not really expect to pass away during that time. If your application passed through underwriting, that is a good indication that the life insurance company does not expect you to pass away either. Of course, if you do buy a traditional term policy, and if you do survive it, you will have nothing left at the end of the contract except the satisfaction of having covered your family and surviving.
You Should Still Consider Buying Term Life
Of course, that brings up the issue of why many people never do purchase a policy. Some consumers talk to an agent or shop online to get the best insurance quotes. Then they add up all of the premiums they may pay over the course of decades, and the amount alarms them.
Let us say you pay $50 a month for a fairly large 20 year term policy. Over the course of those two decades, you will have spent $12,000. At the end, your policy will have no cash value or coverage left. Of course, if you did pass away, your family could collect the death benefit. But remember – we are not planning to pass away.
Return of Premium Term Life May Pay You Back
To counter this objection, some insurers came up with an extra rider (option) called return of premium (ROP). This option costs extra, but it provides one benefit that many term life buyers find attractive. If you keep your term policy in force, and if you survive the length of the contract, you get all of your money back. This includes the money you paid for the policy, and it also includes the money you paid for the extra rider.
ROP Rider Example
For our example, let us say that the ROP rider cost an extra $5 a month. Now you are paying $55 a month instead of $50. This means you would pay $13,200 over the length of the 20 year term. At the end of this period, you could get a check back for the entire amount.
Now keep in mind that the figures I used are just meant to provide an example, and not to illustrate any particular policy. Your premiums, and the cost of the extra rider, will vary by your age, health, the amount of coverage you want, etc. If you want to find out how much return of premium term life costs, you can get quotes online or from a good, local insurance agent.
Many people purchase term policies to last until they are near retirement. They find the benefit of getting a check back for a substantial amount of cash attractive, especially since they may not have saved that extra money anyway if they did not have an insurance premium to pay.