Yes, it’s possible – depending on how you define free, and when you want it to be free. To be clear – the kind of free we’re talking about is a return of premium rider – it costs something today and you get a full ‘refund’ if you don’t use the product within a defined period of time.
For the purpose of this article, we’ll assume that you have a basic understanding of what Critical Illness insurance is and what it’s for. If you need a refresher, check out this article.
Can you get coverage for free, right now, with no money? Yes – here’s a small critical illness policy from Industrial Alliance for free, for children for between the ages for 2 and 5. But, that’s not what we’re talking about.
How does a return of premium rider work?
It’s pretty straight forward – and an added incentive provided by the insurance companies to entice clients to opt-in to critical illness insurance. Let’s say you purchased a critical illness insurance policy, you have the option to purchase a return of premium rider, at an added cost.
What you’re getting for that investment is the option to have all of your premiums returned (including the cost of the return of premium rider) after a pre-determined length of time, if you haven’t contracted a critical illness.
On the court, if you purchased a $100,000 critical illness insurance policy for $100 per month and added the flexible return of premium rider (meaning you get the option to return 100% of the premiums you paid after 15 years) for an additional $50 per month – you’d be paying a total of $150 per month or $1,800 annually.
After 15 years, and not being diagnosed with a critical illness, you’d have the opportunity to exercise your right to the return of premium rider, at which point you’d get 100% of your money back – or $27,000.
What kinds of return of premiums riders are there?
There’s a few, but most important are:
- Return Of Premium On Death Rider (ROPD)
your beneficiary will get 100% of the premiums you paid in the case of death and you hadn’t made any claims against the policy.
- Flexible Return Of Premium Rider (FROP)
you’ll have the option to get 100% of your premiums back after 15 years, or any time after that.
- Return Of Premium At Age 65 Rider (ROP)
you’ll have the option to get 100% of your premiums back at age 65, or any time after that.
There is a rider for a paid up critical illness policy which works like the Flexible Return Of Premium Rider but at 20 years, instead of 15 years.
Are there alternatives to a return of premium rider?
Yes, some people find it best to create their ‘own return of premium’, as in, investing the same amount that the return of premium rider would have cost and going-it-alone in the market. Ultimately, this will garner a better return for the most part. But we’re exposed to a new level of risk – the general ups and downs of the market and for some, that is not an acceptable risk. Consider, the return of premium rider is guaranteed to not loose money, via contractual obligations – it’s in the papers.
What is the best return if premium rider?
That all depends on what you value the most – having the critical illness coverage or the option to get your money back – and when.
If you’re someone who is intent on have critical illness coverage for your whole life, then a paid up T-100 critical illness insurance policy with return of premium rider may be the way to go.
If you know you’ll likely collapse the coverage in 15 or 20 years, say because, you’re covering a temporary risk while you’re building your savings or nest egg, then a T-75 critical illness insurance policy with flexible return of premiums may be best.
There’s many-a-way to achieve your desired outcome – it’s about discovering what you want and speaking with someone who knows how to get you there.
For more concepts and opinions, explore our related posts below.
What you need to know:
- The concepts offered are based on information available at the time of writing, it is subject to change.
- Coverage is not guaranteed for everyone – this coverage is underwritten and based on an applicants age, sex, smoking status, family history, medical history and a slew of other pertinent information.
- As always, seek advice from your financial professional, accountant and tax lawyer.
- For more information regarding critical illness insurance policies reach out to our office – we are elated at the opportunity to offer a no obligation consultation.
The information in this article is derived from various sources. We do our best to ensure the sources are both accurate and reliable and – information changes. As such, we make no guarantee or warranty to the completeness of the information presented here or it’s application to your personal circumstances. The rates and concepts presented in this article are for informational purposes only. Before acting on any of the above concepts, reach out and get a personalized look at the applicability of this and other insurance strategies for your unique personal or corporate circumstances.