| By :
Marilyn Katz
Do you understand what insurance riders are? These are additional attachments to policies. If they provide extra benefits, they will usually cost more. A return of premium (ROP) rider can be selected for some term life policies. What does it do? This rider pays back every cent of premiums paid when the contract ends. With a normal term policy, once the contract has expired, the policy is worthless. You may have kept your insurance in force for 20 or 30 years. But once it is over, all benefits have been consumed. Of course, we all want to survive our policies. It is a little daunting, though, to think about paying every month for a poilcy, and then ending up with no benefits at the end. That is why the return of premium option has become very popular. Consider an example. Let us say that Mrs. Jones purchased a $250,000 20 year term life insurance policy. Let us assume that her premium will be thirty dollars a month. At the end of twenty years, let us say she has survived her policy. This means that nobody collected any benefits from the coverage. At the end of that time, she may consider herself lucky because she is alive. But her policy will not provide her with any more coverage or any cash value. Meanwhile, she can look back and realize she spent $7,200 for her policy. Now let us say that Mrs. Jones decided to purchase a policy with the ROP rider. It will cost her a bit extra, so let us say she spent $35 a month instead of $30 a month. So over the course of 20 years, she spent $8,400 instead of $7,200. But now, she can actually get a check back for the entire amount she spent. She not only got 20 years of life insurance coverage, but she gets back a check at the end of the term. This is a pretty good deal when you remember that this only cost Mrs. Jones and extra five bucks a month. Clients wonder if they get paid interest. You do not, but you do get life insurance. Consider that your interest. Even if the value of the returned premium is less than it would have been 20 years earlier, it is still something! Is this the right choice for you? Your own personal situation must be considered to decide which is better. This works out well for many consumers. Lots of people choose to buy a large term policy to cover them until they get close to retirement age. This is the time when most of us have a mortgage to pay off and kids to raise. For many of these people, a return of premium check can come in very handy. It can go into a retirement account. It could also be used to purchase some retirement life insurance, like a smaller whole life policy. Before you buy coverage, it is important to understand how the different types of insurance work. That way you can make a good decision for your future.
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