Term insurance is a type of life insurance which provides coverage to the policyholder for a specific period of time (term). During the term, if the policyholder dies, the insurance company pays a designated amount of money – the death benefit – to the beneficiary.
Term insurance does not have any investment component or a cash value associated with it. Thus, there is no return on term insurance. The cash value of term life policies is zero. As such, during the policy term no money is returned to the policyholder, and any premiums paid are lost.
However, having term insurance can help you protect your family and other dependents against financial losses resulting from your premature death. It can provide financial security if a breadwinner passes away, giving your family the resources it needs to maintain previous lifestyles or pay bills. The policy is designed to pay out a death benefit in the event of the policyholder’s death. That's the only benefit you'll receive from the policy.
Some insurance companies may offer Return of Premium (ROP) term life insurance plans. ROP plans return the full sum of all premiums paid throughout the life of the policy. The benefit is paid upon the end of the term and only if the policyholder survives the entire term. In other words, ROP life insurance returns some of the money to you if you don’t make a claim prior to the end of the policy term.
You can compare and review rates of different term insurance plans by using online resources. Websites like PolicyX.com can help you compare various plans, determine your current life insurance needs, and make an informed decision.
Bottom Line: Unlike other types of life insurance, there is no return of cash value on Term Insurance as it does not have any investment component associated with it. However, some term insurance plans may offer Return of Premium (ROP) features that may return the policyholder a portion of the premiums paid if they survive the policy term.
