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Can You Get Your Money Back at the End of a Term Life Insurance Policy?

What is term life insurance?
 
Simply put, term life insurance is a life insurance policy that guarantees the payment of a stated death benefit during a specific time period, or “term.” 1 Because its benefits are limited by time, term life insurance is usually the least expensive form of life insurance and the most common. 2 For this reason, term life insurance policies are most frequently offered by employers to their employees. However, as term life insurance policies are a contractual agreement between the employer and insurance provider, your term life insurance coverage is generally only available to you through your employer so long as you continue your employment, or until you decide to opt-out of your policy. 3
 
 

Most term life insurance policies offer no cash value, like permanent life insurance policies do. 4 However, there are some term life insurance policies that offer a return-of-premium component to them.

Can I get money back at the end of my term life insurance policy?
 
Unfortunately, there is no straight-forward answer to this question. Most term life insurance policies offer no cash value, like permanent life insurance policies do. 4 However, there are some term life insurance policies that offer a return-of-premium component to them—which would allow potential insureds the opportunity to get cash back at the end of their term.
 
The Return-of-Premium Rider
 
Like all things, term life insurance policies come in all shapes and sizes. As such, there are cases in which term life insurance policies allow for (or carry) a return-of-premium rider, which would give the insured their money back at the end of their term life policy. 5 But what exactly is a return-of-premium rider, and how does it work?
 
In short, a return-of-premium rider is an additional benefit that can be attached to an insurance policy, a return-of-premium rider returns the premiums paid to the insured should they outlive the term of their policy. 6 Also known as return-of-premium life insurance, the return-of-premium rider gives the insured the added security of knowing that they maintain their financial safety net, making the increased price of the policy worthwhile for some. However, even in cases where a return-of-premium rider is available and attached to your existing term life policy, it is important to note that you may not be eligible to receive the entire sum of the premiums you’ve paid at the end of your term, as the cost of any fees or additional riders may not be returned….meaning you may not receive your whole value back. 7
Conclusion
 
At the end of the day, whether it is better to invest in a return-of-premium rider or not boils down to personal circumstances. For those who are satisfied with their term life insurance policy and are looking for a little added security, a rider can help provide just that. However, each policy and rider are bound to differ—and as such, it is of critical importance that the insured review and understand the conditions in which their potential rider and term life insurance policy operate.
  1. Dave Ramsey, Term Life vs. Whole Life Insurance, 2019
  2. Insure, Term life insurance: How it works, 2019
  3. Investopedia, Term Life Insurance, 2019
  4. Investopedia, Term Life Insurance, 2019
  5. Policygenius, Is return of premium life insurance worth it?, 2019
  6. Policygenius, Return of premium rider, 2019
  7. Investopedia, Are return-of-premium riders worth it?, 2019