Does anybody else have the type of life insurance that pays you back if you don’t die?
Both my husband and I pay monthly premiums for a “term” life insurance plan that expires in 20 years. We pay a little bit higher premium I believe but then at the end of the term, if we don’t die, we get that money back.
We are 25 years old, so our premiums were low to begin with, so paying a little bit extra wasn’t a big deal. Our insurance company is AIG though… what if they go under and can’t pay us back in 20 years?
June 24th, 2009 at 3:21 AM
AIG’s insurance business should not be in severe jeopardy. Their insurance business is profitable. It’s their investments that are going sour. It’s likely that if AIG goes under, they’ll be bought by another insurance company that will continue operations.
How long have you had the policies? If you’re really that concerned about it, and the policies are new (less than a year old) you may want to consider buying policies at another company and cancelling those AIG policies after the new policies have been issued.
And so you know what type of quotes to ask for if you shop for insurance, those policies are called Return of Premium Term policies, or sometimes Term Policies with the Return of Premium Rider. I know that Phoenix Wealth Management has very good prices on them.
Also, you may want to consider looking into 30 Year terms. Sometimes, when you have the return of premium option, those will actually be cheaper than a 20 year term. Plus, you get the cheap coverage for an extra 10 years, and even more money back after the end of the term.
June 24th, 2009 at 3:21 AM
If AIG goes bankrupt, you’ve probably lost everything involved. There’s no money nor a company to pay you back.
June 24th, 2009 at 3:21 AM
You will become a creditor/payee listed on any bankruptcy paperwork with AIG. And unfortunately our bankruptcy laws favor corporations over consumers which means you will likely get nothing more than a piece of paper saying a non-existant company legally owes you money.
June 24th, 2009 at 3:21 AM
What that is on your policy is called a Return of Premium rider, it’s a very nice feature that you have taken advantage of for a term policy.
I wouldn’t worry too much about AIG right at this point, if they do go bankrupt or out of Business the policy you have is a contract that is protected under law, your policy will be assumed by another insurance company who will have to honor your contract.
June 24th, 2009 at 3:21 AM
Well, everyone dies at some point, however I think you’re talking about a life insurance policy that has a “return of premium” rider or addition.
How Return of Premium works; With a traditional term policy you pay a set amount for a set number of years (10-20-30) and if you were to die during this time your beneficiary gets the policy amount.
The downside to term is, what happens if you outlive your policy? Well, nothing…you simply get a new policy or you go uninsured.
With Return of Premium: If you don’t die within a certain period of time, you get most of your money back. You essentially “loaned” the money to the insurance company and they made interest on your money.
The down side to ROP or Return of Premium is you pay more for this option. So there’s a built-in increase to this term policy. So make sure you really look at the numbers to see if it makes sense.
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