Most new tax-qualified plans won’t allow a cash-back return of premium feature if you terminate your policy without using it, because you will be taxed on any premium that you get back that you deducted on our taxes. Instead, tax-qualified policies usually offer an option called a shortened benefit period, which is like a premium account. This means that if you cancel your policy after at least three years, the insurance company must pay a claim at any point in your life equal to the amount of premium you paid in. Costs are increasing so fast that this benefit may not be very meaningful compared to the extra premium, which can be as much as 30%, that you will pay for this feature. Few people have bought the return of premium feature. The odds are very high that you will use the coverage, especially if you buy home health benefits, and many people would rather put the premium difference in a mutual fund, an annuity, etc., so they can be sure of not losing it if they have a claim. A couple of policies return the premium even if you have had a claim for people who are willing to pay the substantially extra premium this feature costs…normally about 50% extra.
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