Term Life Insurance, Return-of-Premium

What it protects against
Financial loss to beneficiaries due to death of the insured.

How it works
Policyowners pay a periodic premium, and insurers pay a stipulated death beneift if the insured dies within the coverage period. These policies work like level-premium term life except that all premiums are returned to the owner at the end of the term, and some premiums may be returned if the owner terminates the policy earlier. Premiums are higher than for traditional term life. Contracts typically cover 15 to 30 years. Prospects who qualify for preferred risk classes will pay lower premiums than those in standard risk classes.

Who needs it
People who need term life insurance but expect to survive through the life of the policy.

Who may not need it
Anyone who may not need life insurance, such as a single person with no dependents. Someone who needs permanent insurance.

When to buy it
Term insurance is most often appropriate for young families that need to protect income while children are young and until retirement income is saved. The younger and healthier an insured is, the less term insurance will cost.

How to pay for it
Periodic premiums.

Terms to Know
  • Grace Period  (View Definition )