Return of Premium Insurance

Discussion in 'Disability Insurance Forum' started by slp1962, Apr 1, 2017.

  1. slp1962
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    slp1962 Member

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    If someone purchases a Supplemental Disability policy that has a term date and allowed for a return of premium, could the returned premiums be non- taxable. Is there situations where it could be non-taxable and situations where it might be taxable, and why, if both options are possible?
     
  2. DHK
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    DHK Well-Known Member

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    Return of premium - your basis - is always non-taxable.

    Only gains would be taxable, such as if you earned a % every year on top of your premiums - such as in a cash value policy above premiums paid in.
     
  3. slp1962
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    slp1962 Member

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    Two part question in response: if the amount of the returned premiums is exactly the same as the premiums paid, would that mean there would be no taxes on the returned premiums? Then: I was told that a purchaser can take a tax deduction when they pay the supplemental health insurance premiums? Is this true? If true, does that means the purchaser can to decide to that the tax break when they make pay the premium or receive the return of premiums tax free (assuming the amount of the premiums paid are the same as the return of premiums)?
     
  4. Tahoe Ray
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    Tahoe Ray Well-Known Member

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    Only if paid for with after tax dollars...ROP policies paid by a business (where a deduction was taken) can be taxable to the employee if they receive the return of premium.
     

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