Return of premium is a type of insurance policy in which all or a portion of the amount of premiums paid during a policy period will be returned to the policyholder if claims are not filed, or if the amount of claims filed is smaller than the amount of premiums paid. This type of policy is commonly used in life insurance.
Return of premium policies are not used for whole life or permanent life insurance, since those types of life insurance cover a person until they die and a death benefit will have to be paid out. However, for term life insurance, a person could potentially have life insurance for ten, twenty, or even thirty years and never file a claim. For this reason, many life insurers offer return of premium policies so that those policyholders can get a return of all or part of the premiums they paid.
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