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Term life insurance policies – get rewarded for staying alive

Thursday, September 29th, 2011

Staying alive can get you rewards, especially if you have purchased term life insurance policies. There are a number of policyholders like David Sharpe, a resident of Los Angeles, who is shelling out $11,240 each year on his term life insurance premiums. However, he hopes to get all of his money back after the expiration of the policy after 30 years and he hopes to be alive until then. If he is still alive after the policy expires, he will get a total of $337,200 and this would be tax free. He is 34 years old and is confident that he will live way beyond the 30 years that is covered in his policy.

These numbers are growing and there are a number of policyholders at Mutual of Omaha, Federal Kemper, AIG American General, as well as other insurers who are looking forward to purchasing the extra-cost return-of-premium policies. This seems to be a great alternative when compared to the traditional term which is essentially a no-frills insurance policy that most people claim are the best way to purchase greater amount of protection at a low cost.

There is no investment component in the term coverage and it does not increase the cash value either. All it does is, ensure that the beneficiaries get the money after the death of the policyholder, while the policy is still in force. So, if you stay healthy, it will not necessarily be the same as collecting your homeowner’s insurance just because there was no damage to your home.

However, the protection offered by term life does not have the necessary appeal as far as buyers are concerned and it does not have the components that the insurance agents normally crave for. There is no guaranteed payoff whether you live or die. Doug Israel, who is a senior vice president at American General states that people don’t really like spending money on something that they think they may not use. The reason why traditional term insurance is so cheap is because of the fact that for most buyers the chances of availing benefits is really small, states Byron Udell, who is the chief executive of AccuQuote – the online insurance broker.

The return-of-premium policies cost 25% to 50% more each year when compared to regular term policies. There is an increase in cost and it is the extra amount that the insurer invests and that helps in providing the resources for the returned premiums.


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