No, you cannot get money back from most standard Term Life Insurance policies. Term life insurance lasts for a set period of time, or “term,” such as for 10 years, 15 years, or 25 years. If you pass away at any time during the term, your beneficiaries will receive the full death benefit amount. If you outlive the policy, you will not be able to recover any of the premiums that you paid in, and you will have to purchase a new policy in order to provide a benefit to your dependents.
The advantage of a term life policy is that in exchange for relatively low monthly premiums, it pays out a substantial lump sum to your beneficiaries in the event that your death occurs during the policy term.
While you typically are not able to get money back from a term life insurance policy, there may be some possible exceptions to the rule. In the following cases, you may be able to recover funds paid into a term life insurance policy:
You canceled the policy within the first month. By law, the company must refund any money you paid if you cancel the policy within 10-20 days of purchasing it. The time frame varies by state to state as well as the insurance companies’ policy. This is known as the Free Look Period.
You pre-paid premiums before canceling. If you pre-paid premiums ahead of schedule and cancel your policy, the insurer may refund this money back.
You purchased a return of premium policy rider. For an additional sum, many companies allow you to make your Term Life Insurance policy refundable at the end of the term – though the price may be steep!
What is a Return of Premium (ROP) Term Life Insurance Policy?
Companies offering the flexible “Return of Premium” rider pay you a 100% refund of your premiums if your policy terminates while you’re still alive. The company keeps the administrative fees and the one-time amount paid for the additional rider, but the monthly premiums you’ve paid over the years will come back to you in full, tax-free, after your term expires. You can then use this lump sum any way you wish. Select insurers offer this ROP rider.
Return of Premium life insurance policies vary by insurer. During the 15, 20, or 30-year term, some insurance companies will let you borrow against the amount accrued, although interest will be charged to the loan and the amount of death benefit may be reduced. If you cancel this type of policy prematurely, it may not be possible to get the full amount of premiums refunded. In today’s life insurance marketplace, Return of Premium is more common in permanent policy designs than it is with term insurance.
Regardless of how much you’ve paid in, your beneficiaries will receive the full death benefit amount if you die before the policy term expires.
How much does an ROP rider cost?
If you want your money back, it’s going to cost you. Return of Premium policies generally cost 3x as much as a standard Term Life Insurance policy. If you are considering a Return of Premium term policy, it would make sense to compare pricing with a permanent policy design. Requesting a quick, free policy quote is the best way to know for certain what insurers are charging in your area.
What are the alternatives to Return of Premium Term Life Insurance?
A standard Term Life Insurance policy may be all you need. If you outlive the term, you have several options available, such as:
Replace your existing term policy with another after expiration. Most people who have Term Life Insurance either have enough money saved up after the term expires that they no longer require a policy, or they simply shop for a new policy.
Convert your policy to a whole life/permanent life insurance policy. A Whole Life or Permanent Life Insurance policy allows you to access a portion of your premium – the “cash value” of your policy – should you need a loan for any reason. If you need to, you can get the entire cash value of your policy by surrendering the policy.
Get a Free Policy Quote on Term Life Insurance
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