Is a Return of Premium Rider Right for Me?

iQuanti: Having a life insurance policy is a great way to ensure that your family is financially secure if you die within the policy term. The death benefit can help your spouse maintain household bills and their current quality of life as well as cover the cost of your children's college tuition or any other expenses. 

But you may be wondering what will happen if you outlive your life insurance term. Paying a life insurance premium every month or year can get expensive, and you may lose out on your money if you don't have a return of premium rider. Continue reading to learn about how a return of premium rider works to decide whether it's right for you.

How does a return of premium rider work?

A return of premium rider is an additional benefit that you can add to a term life insurance policy. The return of premium rider can help refund as much as 100% of premium costs if you don't pass away during your policy's term. For example, if you pay monthly premiums for a 10-year term life policy and you outlive the term, you could receive a refund for the money you paid for the duration of that policy. 

The death benefit is typically a lump sum payment that can cover final expenses, pay off debts, or provide for your loved ones when you're no longer with them. If you outlive your life insurance term, coverage ends and there is no death benefit payout. With a return of premium rider, your premium payments are refunded at the end of the term and you can use these funds as you like.

Benefits of return of premium riders

There are a few benefits that you should know about when considering a return of premium rider in addition to your life insurance policy:

  • Return of premiums: You can get back all or most of what you spent on your monthly premium during your policy term if you outlive it.
  • Save money: The return of premiums paid is typically not taxable as it is considered a refund, not a payment.
  • Life insurance protection: You will still receive life insurance protection during your policy term.
  • Death benefit: A guaranteed death benefit will be issued to your beneficiaries if you pass away while your life insurance policy is in force.

Is a return of premium rider right for you?

To decide whether a return of premium rider is right for you, it's wise to consider your unique situation. Here are some general scenarios where getting this rider may make sense: 

  • You're young and in good health. 
  • You expect to be alive when your term life policy expires. 
  • You plan on using your life insurance policy as collateral for a loan.
  • You want peace of mind knowing that you'll get your money back if you never use your policy.

The bottom line

If you're considering purchasing a return of premium rider, it's important to weigh your options carefully. This rider can be a great benefit if you believe you'll outlive your term life insurance policy and could use the extra cash. Ultimately, you can make your decision on whether to purchase a return of premium rider based on your unique circumstances.

Source: iQuanti, Inc.