how do you like the idea of paying on a lifeinsurance for your entire life and when you get done with your policy you get a refund?this is jeff rose, certified financial planner. one of the biggest complaints i hear aboutterm life insurance is that you pay into it over the course of 10-20-30 years and at theend of that period you have nothing to show for it other than the fact you were insuredthe whole way. what a lot of people don't know is that there is a rider called a returnof premium rider that allows you to get a return of your premium at the end of the periodwhether it be 10, 20, or 30 years. i wasn't really quite familiar how this thingworked several years ago until i had a client ask me about it, so of course i had to dosome homework. what i found was that if you're
going to get a return of premium life insurancerider on your life insurance policy, you have to pay more. i have a post on the site thattalks about the difference of the cost so you can see how much more you pay. the next obvious question would be is thereturn of premium rider on your life insurance policy worth it. from my standpoint, wheni ran the numbers and figured if i just bought a basic term policy without the rider andtook that difference and invested it, and as long as i averaged between 7% or 8% overthe next 30 years, it was much more advantageous to do just that. pay the cheaper term insurancewithout the rider, invest it, and you have more cash return to you at the end of theday.
obviously there is no guarantee in that. thestock market has been doing a lot of this lately, so if guarantees are more suited foryou then the return of premium rider might be worth it. if you do opt for the returnof premium rider just know this: number one, you're going to be paying much more for itso you better be able to afford the out-of pocket expense. the second thing is that youhave to keep it mostly the entire term of that policy, so if you have a 30-year policy,to get that 100% return of premium you have to have 30 years in it. you do get a proratedportion back if you've kept it for an extended period of time, but you still have to haveit for, i would say at least 20 years or so to make it worth it.
if you have any more questions on the returnof premium rider or any life insurance questions, be sure to check out my site, lifeinsurancebyjeff.com.see you soon. the opinions voiced in this material are forgeneral information only and are not intended to provide specific advice or recommendationsfor any individual. to determine which investment(s) may be appropriate for you, consult your financialadvisor prior to investing.
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