The most common type of life insurance is term. It is a good option for people who only need temporary coverage, especially because it is much cheaper than whole life insurance. But it is not perfect, and many holders of term policies are unhappy with the fact that, if they survive the entire term, they will have nothing to show for it. The death benefit only pays out if the policyholder dies. In response to these complaints, insurance companies have invented a new type of insurance: return of premium life insurance. The basic concept and appeal of this insurance is that, if you survive through the term of your policy, then your premiums are refunded to you in full.

Return of premium life insurance is similar to term insurance in many ways. In both types of policies, the policies are good for a specific term. Both types of policies require you to pay a fixed premium on the policy, although the premiums on return of life policies are generally higher. If you die at any time during the term, your beneficiaries can collect on your death benefit, and the death benefit is tax-free. However, if you survive the term, that is where the similarities end. With a term life policy, you are left with nothing. But with a return of premium policy, every cent you paid into the premium is returned to you.

While it is understandable that this option is very tempting for people who were considering term life insurance, return of premium life insurance is not perfect, either. One of the bigger flaws with this type of account is that, if you have to cancel the account for any reason, then you forfeit any claim you had to your premiums. And since the premiums are higher than term life premiums, some argue that you might as well just get a whole life account.

However, it is always nice to have options. There is a good chance that you will outlive your insurance term. If that is the case, then most people would love to get their premiums back. Others prefer term life because it is simply cheaper and, if something happens to you, you ultimately get the same coverage, but you did not spend as much on it in the first place. But as with all insurance decisions, you should consider your own circumstances and discuss your options with your spouse before making a final decision.