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Another Suggestion For Return Of Premium Riders

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Another Suggestion For Return Of Premium Riders

To The Editor:

The letter to the editor in the Aug. 18 issue says the cost of the Return of Premium Rider is forfeited if the policy matures as a death claim and that the policyholder would therefore have overpaid for the death benefit (and, presumably, the policy as a whole).

This would not be true if the Return of Premium Rider is viewed and priced as a pure endowment, payable only in the event that the insured survives to the end of the endowment period. The forfeitures would be taken into account in funding the pure endowment benefit, so that in effect the policyholder would be paying a lower premium by benefiting (as long as the insured survives) from the forfeitures attributable to those insureds who dont survive.

It is true, however, that the term “no-cost” is misleading because the Return of Premium is a simple sum of the premiums paid, without interest.
Peter Lencsis

New York, N.Y.

Reproduced from National Underwriter Life & Health/Financial Services Edition, October 3, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.