No Cost Term Insurance is also known as Return Of Premium Life Insurance. Return of premium policies work off that low risk but increases the cost. A common return-of-premium policy might cost about 25 percent to 50 percent more a year than regular term. It's the extra amount, which the insurer then invests, that provides the cash for the returned premiums. It's like buying traditional term and investing an extra sum that will grow at a steady pace without risk. The insurance isn't really free, but to many it feels like it is. " The biggest determinant of the extra charge for a return-of-premium feature is the length of time until you get the premiums back. A 30-year policy has less excess cost than a shorter one because there is more time for the additional funds to grow. A 35-year-old male in good health might pay $970 annually for a 30-year, $500,000 return-of-premium policy. That's $295, or 44 percent, more than regular term from the same insurer. A 20-year policy might cost $1,175, or more than three times the cost of regular term. A 15-year policy, at $1,645, is almost six times the cost of traditional term. Insurers report particular interest for the policies among younger buyers. Single parents find the coverage appealing. They are very concerned about leaving a dependent without support but young enough that they really do not think their beneficiary will ever collect anything. No Cost Life Insurance premium returns are tax-free. Return of Premium policies aren't sold as investments, however, the return from sticking with one may not be all that bad - and, in fact, may be exceptional by current standards. By counting the extra premiums paid (those amounts in excess of the cost of a basic no-refund term life insurance policy) as the amount invested and the overall premiums paid back as the investment payoff, annual tax free returns of roughly 5 to 9 percent resulted on a sampling of policies--the longer the policy's life and therefore the smaller the extra premium, the better the return. (You'll need a financial calculator to estimate this yourself.) If you invest this way on your own, the net gain may be taxable; wrapping this up in an insurance policy makes the total payback a refund of the premiums you paid, and thus not taxable. Get a Quote for No Cost Life Insurance Below. |
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