Return of premium life insurance is a type of term life insurance policy that returns the premiums paid for coverage if the insured party survives the policy's term. For example, a $1,000,000 policy bought for $10,000 a year over a 30 year period would result in $300,000 being refunded to the surviving policyholder at the end of the 30 years.
If a return of premium policy is viewed as an investment, rates of return are calculated based on the incremental cost above the cost of regular term insurance. A sampling of policies found returns in the range of 2.5 to 9 percent.
Critics point to the rate of return being less than in a typical investment, the extra cost of the policy compared to basic term life insurance policies and that, if the policy is canceled at any time, no money is refunded. Many policies do allow prorated refunds at some point during the life of the policy.
^ a b Wiener, Leonard (17 October 2004). "Getting a payback"
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