Premium life insurance is a special type of term life insurance policy coverage that protects your family during the years they need it most but does not commit to life insurance premium payments for 10, 15, 20, or 30 years. It provides short-term flexibility and pays back some of your monthly premiums. Not all life insurance companies offer this type of policy.
Premium life insurance provides a death benefit to your loved ones if you unexpectedly pass away during your term. It also gives you some of your monthly premium payments back if you are still living when your life insurance coverage ends. However, it is more expensive than a standard term life policy.
Deciding on a Premium insurance policy can depend on what you hope to get out of your life insurance policy and what you’re willing to pay for. Here are 4 important things you should know about premium life insurance.
1. What is Premium Life Insurance?
This coverage type can either exist as a stand-alone policy or as an optional life insurance rider on a standard term life insurance policy. The way it works is if the insured outlives the term period, it will return most or all of your paid premiums, and you won’t pay income tax on the payout. Premium life insurance is less popular because it fits only a few families and has some shortcomings. Know the pros and cons of this specific type of life insurance policy to determine if it meets your needs.
2. Pros and Cons of Life Insurance Return of Premium
For the pros, you get back most or all of your premiums if you outlive the term duration and haven’t let the policy lapse. This return is not taxed, which is another added advantage of having this form of coverage. However, the cons include much higher monthly premiums to be paid, and there is no capitalized interest on the returned premiums. Also, if you let your policy lapse, no premiums will be returned. Also, this type of life insurance is not available through all life insurance agencies.
3. How Much Does Premium Life Insurance Cost?
Generally, premium life insurance is more expensive than other types of term life insurance, which makes it a less popular option for many people. For instance, according to State Farm, a 25-year-old woman in excellent health might pay about $52 per month for a 30-year, $250,000 life insurance return of the premium policy. In contrast, this same woman would pay between $19-$25 a month for a standard term life insurance policy.
4. Is Premium Life Insurance Right for You?
The primary purpose of life insurance is to protect the people you love by providing them with a death benefit in case you pass away while they are still dependent on your finances. Premium life insurance policies will still offer that protection. If you pass away during your term, your beneficiaries will only receive the death benefit associated, but none of your premium costs will be refunded.
A permanent policy can be more advantageous as it has a cash value that can be withdrawn from the policy and used to cover retirement expenses, home remodeling, or student loans. Also, some variable life insurance policies and universal life policies allow you to invest your life insurance cash value to grow along with the market. Some people choose medically underwritten term life insurance because the premiums are lower.
There are many options when it comes to life insurance. Premium life insurance may make sense for your family and situation. Whatever your insurance needs may be, the experts at J. Archer Insurance Group are available to help you get insured today! Give us a call at @ 619-347-4700 if you have questions or want to plan a visit.