Having your Cake and eating it too

Living Benefits, Return-of-Premium;
Clients Cash-in on Life Insurance

Wouldn't it be great if your auto insurance company paid you all your premiums back if you never had an accident, or used your coverage?

 Something usually unheard of with insurance companies is now becoming standard practice as a growing number of insurance companies jump on the Return-of-Premium (ROP) bandwagon.

 Wherein the past, life insurance protection would pay you nothing if you outlived the policy -- top-rate life insurance carriers, are now paying people to stay alive.

How is this possible? Let's say a consumer wants to protect his family with a term policy for 20 years -- for a little extra premium, if the insured is alive at the end of the 20 years, they will get all of their premiums returned to them, guaranteed and tax-free.

The way it works is the insurance company invests a portion of their premiums while they invest in the plan. If they need the coverage during their 15, 20 or 30-year term, then their family would be protected, but if they don't, all premiums would be returned to them.

Being offered as an alternative to traditional term-low-cost insurance, ROP has become wildly popular because not only does the coverage offer your family instant coverage should they need it, but by living, the plan essentially pays for itself and also acts as a tax-free vehicle.

ROP gives clients the power to use the refund for other financial goals, such as, retirement, paying off their mortgage early, helping towards a child’s education cost, or simply going on that dream vacation.

For example, a 35-year old male, non-smoker, with good health could purchase a $250,000, 30-year guaranteed term policy for a little as $43.94 a month, with the ROP its just $52.02.

Both plans offer $250,000 of protection for a rate not to increase for the full term, but if the client outlives the policy without ROP he would have spent $15,818.40. For only an extra $8.08 a month, not only would he not have spent $15,818.40, he would receive a tax-free refund of $18,727.

As with some term life insurance policies, a ROP policy can also be converted into a permanent life insurance policy, such as a whole or universal insurance policy, at the end of its initial term. Often times without the consumer having to retake a physical, or prove insurability.

Many advisers tout the ROP option, only offered through Mortgage Protection plans, as a way to buy the greatest amount of protection for the smallest amount of money. Depending on age of the insured and the type of policy, some restrictions may apply. 

Unlike traditional life insurance, that usually only focuses on the actual death benefit, mortgage protection has many “living” benefits, including: Disability, where if you become injured on the job or off the job, due to sickness or injury, the plan would make your monthly mortgage payments until you can go back to work. The consumer would define the elimination and benefit period of the plan, to help determine the ultimate cost; and Critical illness, which either pays out a lump sum or provides an income if you are diagnosed as having one of a number of illnesses, including cancer, strokes or heart disease -- even if you make a full recovery.

 These policies also include many free options such as Unemployment Waiver-of-Premium, where if you become unemployed the plan waives its premium for a specific period of time and essentially pays for itself; and Accelerated Death Benefit, that allows you to cash out up to 75% of your policy's face amount should you become terminally ill.

 Mortgage protection plans also include several Settlement options, in which you can decide whether to receive a lump sum payment, or an annuitized income stream.

There are truly dozens of options and features to choose from, so it is always advised that you meet with a licensed agent before selecting the best plan for you and your family. Also, by meeting with a licensed agent consumers can literally choose from a menu of options and basically custom-design a plan that best fits their needs and budget.

 To find an agent near you, contact an independent broker. Since insurance premiums are based on gender, age, medical status, and lifestyle; by using an agent affiliated with an independent broker, you can be assured of the best match between you and the insurance carrier.

 Brokers often represent many different insurance companies, and can offer you their product expertise and unbiased resources to figure out which insurance companies will offer you the most competitive rates.