PSI Ohio Insurance Practice Exam

What is the return of premium rider?

1. An investment option for policyholders

2. A decreasing term insurance policy

3. An increasing amount of term insurance that equals premiums paid

4. An option for cash withdrawals from the policy

The correct answer is: An increasing amount of term insurance that equals premiums paid

The return of premium rider is a provision that can be added to certain life insurance policies, typically term life insurance. When this rider is included, it ensures that if the policyholder outlives the term of the policy, they will receive a refund of the premiums paid over the duration of the term. This feature is appealing to many individuals because it offers a safety net; they can recover their investment in premiums if they do not pass away during the coverage period. The rider generally provides a level of increased benefit, as the total premiums that are refunded can effectively serve as a form of investment for the policyholder. This can make the option of term life insurance more attractive, as it combines the protection of life insurance with a refund of cost if coverage is not needed. While the other options mention aspects associated with insurance and financial products, they do not accurately represent the function of the return of premium rider. An investment option for policyholders would suggest a different type of policy structure, decreasing term insurance refers to an insurance product with diminishing coverage over time, and an option for cash withdrawals relates more to universal or whole life policies with cash value accumulation. Each of these does not provide the specific feature of returning premiums paid if the insured survives the policy term,