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Ask Dave

No Deposit, And NO Return

Faith wants to know if a term life insurance policy should have a return feature on it. What is it, and does she need it?

QUESTION: Faith just met with a life insurance agent and wants to know if she should get term life insurance with a flat rate or the return feature. She and her husband are also in their 30s and wonder if their policy should go for 20 or 30 years. Hear Dave detail why return is bad.

ANSWER: Get a flat term policy. Return is just another way to save money there, but it costs you extra. If you die, you get all your money back, but if you instead had invested that extra money, you’d have it all back anyway. It’s a ripoff. If you are going to have kids someday, do a 30-year policy. The reason being is that I want the kids grown and gone by the time the insurance runs out. If you buy 20-year term insurance and have several kids over the next 5 years, the youngest will be 15 when the insurance runs out. A 30-year policy might be your best plan there, but generally speaking, 20 years is all right.