When you buy a financial product, you must think that you’re getting a good deal; otherwise, you wouldn’t buy it. But time passes and things change, and a day will come when you revisit your purchase decision. How will you figure out if your cash value life insurance policy, or your indexed annuity, or your variable annuity with a guaranteed lifetime withdrawal benefit, or your hybrid life insurance/long-term care policy is still a good deal? Do you have a plan for that?
Now suppose you add a return-of-premium feature to your term insurance. At first glance, maybe it looks like you can get a 4% after-tax rate of return over 20 years on the additional premium. But term prices, discount rates, and your need for life insurance will likely change in the future. How will you figure out if your return-of-premium term policy is still worth keeping? Instead of a simple premium comparison, you will also have to consider the value of the future refund that you will be forfeiting if you drop your policy.