Q. How do I determine if the return of premium rider is something good for me?
A. Most of Term life insurance gives you a choice of "Return of Premium" rider. What it means is you pay higher than normal premium, at the end of the Term, if the insured is still alive, it will return ALL of your paid premium back to you.
So it's like you are getting a free life insurance.
Or, is it really so?
Obviously not, the insurance company will go bankrupt if it does so. What this rider does is simply let you lend the extra premium to the insurance company to invest on your behalf. At the end of the day, the insurer returns your premiums back to you. If the return generated by the insurance company is better than what you can do by yourself, by all means go for the rider. Otherwise, think it again.
You can use the following tool to evaluate the return you are actually getting by lending insurer this extra premium (note, this return is guaranteed return, so don't treat it the same as the un-guaranteed return you can get from the stock market).
A. Most of Term life insurance gives you a choice of "Return of Premium" rider. What it means is you pay higher than normal premium, at the end of the Term, if the insured is still alive, it will return ALL of your paid premium back to you.
So it's like you are getting a free life insurance.
Or, is it really so?
Obviously not, the insurance company will go bankrupt if it does so. What this rider does is simply let you lend the extra premium to the insurance company to invest on your behalf. At the end of the day, the insurer returns your premiums back to you. If the return generated by the insurance company is better than what you can do by yourself, by all means go for the rider. Otherwise, think it again.
You can use the following tool to evaluate the return you are actually getting by lending insurer this extra premium (note, this return is guaranteed return, so don't treat it the same as the un-guaranteed return you can get from the stock market).
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