If you have term life insurance, your policy may never pay out. In some ways that's a good thing — it means you're still alive! But it also means the coverage from the policy has expired and you (or your beneficiaries) didn't receive any payment.
That's where return of premium term life insurance comes in. With it, you can get back some or all of the money you've paid in premiums.
Here's what you need to know about return of premium insurance, including how much it costs and whether it's worth getting.
What is return of premium life insurance?
A term life insurance policy is only in effect for a set amount of time, usually 10, 20 or 30 years. If you outlive the term, there's no death benefit paid out. But a return of premium policy (or rider) means you'll get reimbursed some or all of the premiums you've paid if the term life policy expired without paying out.
Return of premium riders are typically available with level-term life insurance policies, where premiums are set when you purchase the policy and stay the same throughout the entire term.
Not all carriers offer return of premium insurance. State Farm, one of CNBC Select's top term life insurance carriers, offers a return of premium policy with term lengths of 20 or 30 years and coverage starting at $100,000.
In 2023, State Farm topped JD Power's life insurance customer satisfaction survey for the fourth year in a row. It offers a variety of discounts, including for bundling your policy with home or auto insurance.
State Farm Life Insurance
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Policy highlights
State Farm offers a variety of term, whole, and universal life insurance products to choose from, alongside other types of insurance. It's rated highly for both financial stability and customer service.
How much does return of premium life insurance cost?
Term life is typically the most affordable type of life insurance, but a return of premium policy or rider can double or even triple the cost, according to Policygenius.
Pros and cons of return of premium life insurance
Should you invest in return of premium life insurance? Here's what you need to know.
Pros
- Less risk. Term life insurance doesn't provide a payout if you outlive the term. A return of premium policy (or rider) would refund some or all of the money you paid.
- Can build cash value. Unlike other term life options, return of premium insurance may build cash value that you can withdraw or borrow against.
Cons
- High cost. Return of premium life insurance can cost two or three times what a typical term life insurance policy would.
- Poor return. The money you put into the policy won't earn interest the way it would if you invested it.
- Limited availability. Few companies offer return of premium policies and riders.
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Bottom line
A return of premium policy mitigates the risk of life insurance by returning your payments if you outlive the term. In most cases, however, you'd be better off putting the extra money you'd spend in a savings or investment vehicle, where it could grow over the term of the policy.
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At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every insurance article is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of insurance products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics.
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