Welcome to Quotacy’s Q&A Friday where we answer your life insurance questions. Quotacy is an online life insurance broker where you can get life insurance on your terms. I’m Jeanna and I’m Natasha Today’s question is: what is return of premium life insurance? If you have a term life insurance policy with the return of premium feature this means that if you were to outlive your policy you get a portion of your paid premiums returned to you. If you have a universal life insurance policy with the return of premium feature this means that if you were to cancel the policy you get a portion of the premiums back. Price-wise a policy with the return a premium feature is going to be more expensive than a similar policy without. For example, Prudential is one of the many life insurance companies we work with. It’s also one of the few that offer return of premium term life insurance. If I, a 32-year-old female, ran a quote for a $500,000 20-year term life insurance policy from Prudential it would be about $27 per month. If I instead wanted that same policy but with the return of premium option I would be paying about $89 per month. Regular term life insurance is the best option for most families because of how affordable it is. However, if you can afford to regularly pay the higher cost of a return of premium policy without fail then it’s something to be considered. There are certain situations in which a return of premium term policy may make more sense than a traditional term policy. A return of premium policy can be a good choice to meet divorce requirements. When minor children are involved in a divorce, the non-custodial parent is typically required to buy life insurance for the benefit of the custodial parent and the children. A return of premium term policy offers the parent the opportunity to fulfill the support obligation and get refunded if they outlive it. A return of premium term policy can also help parents who want to contribute to the child’s college tuition. If a parent dies during the term, the death benefit can insure their child can still afford college. If the parent outlives the policy, the refund of premiums can go towards paying the student loans. A return of premium term policy can also be a beneficial strategy in protecting a mortgage loan. For example, let’s say you have a 30-year mortgage loan you could buy a 20-year return a premium term life insurance policy and if you die unexpectedly within those 20 years your family receives a death benefit and can continue paying the loan. And if you outlive the 20-year return of premium term policy you can then put that refund of premium towards your mortgage loan and get it paid off much sooner. This strategy is only wise if you can comfortably afford the higher premiums that come with a return of premium policy. It does your family no good if you can’t afford it long term and end up having to cancel the policy. A return of premium term life insurance policy only returns the premiums if you outlive the policy not if you decide to cancel it. This is opposite, however, with a universal life insurance policy that has a return of premium feature. A universal life insurance policy is a type of permanent life insurance so there is no outliving the policy. This policy lasts until you die as long as the policy’s kept active. If you purchase a universal policy with a return a premium feature you can cancel the policy and receive the premiums back. Make sure you read the fine print, however. Some universal life insurance policies require the policy to be active for a certain period of time before you cancel it in order to be eligible to get the refund. And sometimes it’s only a certain percentage of the premium if the policy is canceled early on. For example, AIG is one company Quotacy works with that offers what is called a guaranteed universal life insurance policy with a return a premium feature. If you cancel the policy at the end of the year 20, you can receive a refund up to 50% of the total premiums paid. If you cancel at the end of year 25, you can receive up to 100% of the premiums paid. Return of premium life insurance sounds pretty good on paper but be sure to really consider the cost when deciding what type of life insurance to buy. Return of premium life insurance isn’t the best choice for everyone. And purchasing an inexpensive traditional term policy and investing the amount you save elsewhere may be a better option. Check out Quotacy.com and an agent can help you figure out what type of policy is best for your particular situation. Thanks for watching. If you have any questions about life insurance, make sure to leave us a comment. And if you have any questions regarding today’s topic, check out the blog link posted below. And if you’re ready to get quotes, check out Quotacy.com. We’re here to help you find the best deal on the life insurance you want. Bye! Thanks for sticking around. We’d appreciate it if you Liked the video and hit that fancy little Subscribe button to see us every week. Bye!