Term Life Insurance Coverage Is Temporary

Term life insurance coverage is temporary and akin to car insurance. You pay for the service and if you need to use it, the coverage is there. However, when your term is up, that’s it. You never own term life insurance.

If you never need to use it, you don’t get your premium payments returned to you because you paid for the service and now the term is complete. It isn’t considered an asset because it isn’t truly yours.

“The major criticism of term insurance is the customer pays for a benefit that will likely not pay a benefit in return and there is no cash value as with a permanent or whole life insurance policy,” says David Theile, Director in Life/Health Product Management at State Farm. “The design of return of premium products has helped address this issue.”

Return of premium (ROP) insurance may be an option to consider. Most ROP products will give back a portion or the full amount of the premiums you paid, but only if you outlive the policy. If exercising a conversion option, they may allow you to apply that money to the cash value. Premiums are generally given back to the policyholder tax-free. ROP riders can be added to a term life policy at the time of purchase.

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