What Is Return of Premium (Graded)? Definition

Why it matters

This feature protects the buyer from losing money if coverage is short. A family still gets back what was paid, but not the full face amount. It differs from a return of premium term policy, which refunds premiums if you outlive the term. The interest rate and period vary by carrier and state, so check the policy before you buy.

Source: naic.org

Where we use this term

Term life insurance: how it works, what drives price, and when it ends

Related terms

Graded Death Benefit: A graded death benefit is a payout that is only part of the face amount, or a return of premiums with interest, if the insured dies of natural causes in the first years. Full coverage starts after that waiting period.
Modified Death Benefit: A modified death benefit limits the payout during an early period, often the first two or three years, if the insured dies of natural causes. After the period ends, the full face amount is paid.
Return of Premium Term: Return of premium term is term life insurance that refunds the premiums paid if the insured outlives the policy term. It costs more than standard term for the same death benefit.
Return of Premium Rider: A return of premium rider refunds some or all premiums paid for a rider or term coverage if the insured outlives the covered period. It is added for an extra premium.
Guaranteed Issue Life Insurance: Guaranteed issue life insurance is coverage that accepts applicants without health questions or a medical exam. Approval is guaranteed within the age limits, but the face amount is small and a waiting period usually applies.

All 241 terms

Why it matters

Where we use this term

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