What is a Return of Premiums Rider?
Today, is our sixth week in our insurance rider series of posts.
The last five posts are available and we recommend reading them, starting with “What are insurance riders?” to better understand the rest of the posts, including this one.
This post will be focused on the return of premiums rider, what is it, who it’s for, and some of the benefits it provides.
What is a return of premium rider?
A return of premium rider refunds the premium dollars spent on your policy if you outlive the policy term.
As these only cover a set term these riders are only available for Term Life Insurance.
You cannot get this rider for permanent life insurance as you cannot outlive a policy that covers your entire life.
However, this is a great rider to add onto the more affordable Term policies, but keep in mind this rider can push the cost of life insurance up significantly.
For instance, let’s say you bought a 30-year term life insurance policy with a return of premium rider at age 25. 30 years later at age 55, you are still alive.
In this case, the insurer will refund your life insurance payments.
The benefits of return of premium riders
One benefit of return of premium riders is they can provide a form of forced savings.
Traditional term life insurance policies do not have a cash value component, so if the policyholder outlives the term, they do not receive any benefit.
With a return of premiums rider, the policyholder has the potential to receive a refund of all the premiums paid over the life of the policy, effectively creating a form of savings.
Another benefit a return of premiums rider can provide peace of mind for those who want to ensure that they do not “waste” their premium payments.
Many people who purchase term life insurance policies may never use the benefits if they outlive the term, which can lead to feeling like their premium payments were a waste.
With a return of premiums rider, the policyholder has the potential to receive a refund of all the premiums paid, making the cost of the insurance less daunting.
An additional benefit of a return of premiums rider can be useful for those who want to hedge against the possibility of dying before their insurance needs are met.
If the policyholder dies before the end of the term, their beneficiaries will receive the death benefit, but if they outlive the term, they will receive a refund of premiums paid.
This can be a way to ensure that loved ones are financially protected in the event of an unexpected death, while also providing a financial benefit if the policyholder outlives the term.
Contact Us
At Safe Pacific Financial, we specialize in helping Canadian business owners, incorporated professionals, and investors structure life insurance for maximum wealth protection, tax savings, and business growth.
If you would like to discuss whole life insurance or investments, we’re happy to chat and see if we can be a good fit to work with you. Fill out our contact form and we will get back to you within 24 hours on business days.
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