Return of Premium Policies???

Posted in Life Insurance Questions over 2 years ago, 1 reply

My husband has a Universal Variable with life insurance. I really don't understand it very well and we are trying to decide if we should keep it or not. I have spoken with my insurance agent (auto/home) and we have discussed this new term insurance that has a return of premium. I am looking for advice on this. What if the company is not around in 20 years. Isn't this more of a risk?

submitted by Sara Weaver in Monroe, GA

I don't know your particular situation.

In general, I'd 1035 the VUL into WL.

Basically take the cash value of your VUL conract and transfer it into a WL policy.

Your Auto/Home agent may not be familar with this, so I'd find yourself a financial advisor.

To answer your question, return of premium is not as cool as it sounds.

First off, inflation has eroded the value of those dollars. $8,000 in 20 years does not buy the same amount of stuff it does today.

Also, you must weigh the lost opportunity cost of the those dollars. You earned 0% for 20 years on it. What if you could've earned 5-6%...or more?

Here's the bottom line, people are tired of paying for something (term insurance) that covers something that ALMOST NEVER HAPPENS during the time period it is enforce (about 2% of term policies actually end up with the insured dying before the policy's term is over).

So, companies started offering this type of product.......why not go WL, have permanent protection, get an actual rate of return on those dollars?

submitted by Andrew Burks in Salem, IN @ September 02, 2009 - 09:02 AM

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