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Life insurance quotes for payback term life insurance cover

At the cheap end of the life insurance market, you find the term life policy. This is usually a one-way bet. You pay your money. If you die during the term, your beneficiaries collect the agreed amount. If you survive, you continue your life as if nothing had happened. It’s rather like renting a car. During the term of the rental, you have the use of the vehicle. When the term expires, you return the car and go back to walking. Why is this a cheap form of life insurance? It comes down to market resistance. People want the maximum amount of payout for the smallest amount of outlay. They do not want to pay a lot for a product they hope never to use. Indeed, less than 10% of all term policies sold result in claims. From the insurance industry’s point of view, this makes term life cover very profitable. Even when the annual premium rates are low, it’s almost pure cash profit. You may therefore be surprised to discover there’s a relatively recent development which allows the policyholder to recover a proportion of the premium installments paid.

The drawback to the standard term life policy is that there’s no cash value or investment element to build up compound interest. You pay the basic fee for the cover. This new variation allows for an additional element of premium to be paid. This is invested as in the permanent policy and it builds up a cash value which is returned in the event you survive beyond the term. Given the dramatic increases in life expectancy, there’s a very strong probability you will outlive the term and so recovering a proportion of the payment installments may seem an attractive prospect.

Whether you decide to buy this product depends on your view of the world. All the money paid to your insurance company is tax free. The difference between the basic term element and the total is invested by the insurer. This accumulates value less a management fee. At the end of the term, this investment fund is then returned to you. In most cases, this additional element is about 50% of the basic fee. So the question you have to ask yourself is whether you can make investments that will match or produce better results than the insurer. Remember you are not paying out a management fee for your own investment choices. You keep all the gains you make. So let’s say you have magnificent self-discipline and invest this cash every month. Are you so lacking in confidence you cannot outperform the insurer (who is collecting this extra money so it can make a profit)? If you think you are a failure, you get life insurance quotes for a payback policy, pay 50% more than you need to pay and get some of that extra money back. Or you get life insurance quotes for a standard term policy, invest the additional money and shelter it in the tax free 401k.

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