Get your premiums back with the return of premium benefit

Term life premiums you pay over the years:

If, for instance, you get a level term policy with a 20-year term that costs you £30, you will have paid:

Yearly: £30 x 12 = £360
Whole Term: £360 x 20 = £7,200

If you tack on cumulative interest earnings for the premiums, this would balloon to:

  • £9,900 (3% annual interest)
  • £12,500 (5% annual interest)

You could use this as:

  • Part of your retirement kitty
  • Pay off part of your mortgage or buy that vacation cottage by the beach
  • Go on a grand vacation

Term life insurance is perhaps the cheapest type of life insurance. However, once the policy ends, you will not be getting back any of the premiums you have paid for the coverage. If you die within the coverage period, your beneficiaries will receive the sum insured. If you outlive the coverage period, there will be no benefit payments and you can say “goodbye” to the premiums paid.

It’s a “live and lose” matter. You see, the premiums are already considered “spent” – you paid for the insurance company to cover the risk of your dying within the coverage period. Admittedly, the probability of this happening (dying within the limited coverage period) is small, that’s why the insurance coverage provided is priced low.

Indeed, term life insurance is cheaper than the other types of insurance, particularly if you are young and healthy. The drawback with this is that if you survive the coverage period, there isn’t anything you have to show for your premiums. If this is a concern, you can consider getting life insurance with return of premium option.

This benefit or rider allows you to get back all or a portion of the premiums you have previously paid throughout the life of the policy. Please note that getting a return of premium rider may increase the overall premiums by an average of 20 to 30 percent, and may even reach a high of 40 percent.

Is it worth it?

The question is, is tacking on 20 to 40% of the premiums worth it, in order to get the premiums back? The answer is up to you.

You have the following options:

Weighing Your Options

You need to determine whether, at your given age, it is better to go with the term life or with the whole life plan. The following factors should be considered in your decision:

The Return of Premium Benefit rider is just one of the riders you can include in your term life policy, to find out about other riders, click here.

Updated on: 05.06.2013

To secure your family's future, fill in the form on the right and get your term life insurance quote now.

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Term life insurance 101:
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*Scottish Provident 2012 life cover claims paid report.