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Can life insurance premiums be returned?

A return of payment ride will refund your term life premiums if you don't die before the policy expires. Getty Images

At some point, paying for life insurance becomes a necessary part of adulthood. But if you outlive your policy, you may feel like you wasted a bunch of money for no reason.

But that's not always the case. Fortunately, policyholders have options for when their term life insurance policy expires, including an option to have their premiums returned.

If you're in the market for life insurance then start by getting a free price quote so you know exactly what to expect.

To accurately understand how one can go about having their term life insurance premiums returned it first helps to know what this type of policy actually entails.

What is term life insurance?

Term life insurance is a life insurance policy that covers you for a set period of time, usually ranging from 10 to 30 years. The policy will only be active during that time frame. On the other hand, whole life insurance coverage lasts your entire life.

Term life premiums are relatively low and policy amounts can range from $100,000 to millions of dollars.

Companies will often require a medical exam, the results of which will determine your monthly premium.

What happens when a term life policy ends?

Every term life policy will end, but many policyholders don't realize they have several options to choose from once that happens. Fortunately, there are options to choose from when this occurs: 

Return of payment rider 

Some consumers worry that they will have wasted their money if they outlive a term life policy. That's where a return of payment rider comes in. This rider will refund your term life premiums if you don't pass away before the policy expires. It guarantees that you will get your money back if you outlive the term.

If you have a strong family history and are in good health, then buying a return of payment rider may make sense.

But make sure to do the math and ensure you can afford it. Like other insurance riders, a return of payment rider adds an extra cost to the policy. This can make a policy significantly more expensive than a regular term life policy.

If you cancel the policy or stop making payments, however, the money will not be returned to you.

You can explore your term life insurance options by getting a free price estimate now. 

Convert the policy 

Before purchasing a term life policy, you can choose a policy that will let you convert it to a whole life policy at some point during the term. Some insurance companies have a set period during which time you can convert the policy, while others let you convert the policy at any point. While there is no fee to convert the policy, your premiums will usually increase. Whole life premiums are much higher than term life premiums.

You may be able to convert part of the policy into a whole policy and keep the rest as a term policy. Ask an insurance agent what your options are before buying a policy.

Let the policy expire

For most people, the purpose of life insurance is to replace your income when you die so your loved ones won't suffer financially. When picking a term, you should ensure it doesn't expire while your family still relies on your income. If you choose the right term, then you can simply let the policy expire without buying a new one. At that point, you should be self-insured.

Sign up for a new policy

If a term policy expires and you decide you still need coverage, you can purchase a new policy. This might happen if your life circumstances change after you buy the initial policy. For example, if you have kids later in life, you may need to buy a new policy to cover their future expenses.

Premiums will usually be more expensive because you'll be older. And if you have certain health conditions, you may not qualify for a term policy as a senior. For example, a 60-year-old woman who wants a $500,000 20-year policy may pay between $138 and $218 a month. A 30-year-old woman with a 20-year $500,000 policy may pay between $16 and $26 a month.

Your insurance needs will likely be lower when you're older, so you can spring for a shorter policy or a lower amount to save money. For example, you can get a 10-year policy with a $100,000 payout. These premiums will be more affordable while still giving your loved ones some coverage. 

Get a free price estimate here now or use the table below to explore some top life insurance providers.

The bottom line

Some people may hesitate to purchase life insurance over concerns that they will lose their money if they outlive their policy. But that's not always the case. With a life insurance rider, you may be able to have your premiums returned or you may be able to convert your policy into one that works better for you under your new circumstances.

Not sure which is the best path forward? You can easily research your options here now.

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