Question 45

A Return of Premium rider has a premium cost increase.

A Return of Premium rider typically includes a higher premium cost compared to a standard policy, as it provides the policyholder with a refund of paid premiums if they outlive the policy term.

A) Death benefit reduction

This option is incorrect because a Return of Premium rider does not inherently reduce the death benefit. Instead, it provides a refund of premiums, which is a separate feature from the death benefit provisions of the policy.

B) Premium cost increase

This option is correct as the Return of Premium rider generally results in a higher premium due to the additional benefit of receiving a refund of premiums if the insured survives the term of the policy. This reflects the added value of the rider.

C) Accidental Death benefit doubles

This option is incorrect because a Return of Premium rider does not include provisions for doubling the accidental death benefit. Such benefits are typically part of separate riders and are not related to the Return of Premium feature.

D) Refund provisions in the event of a disability

This option is incorrect because the Return of Premium rider specifically pertains to premiums being refunded if the policyholder survives the policy term, not in the case of disability. Disability provisions are usually covered under different riders.

Conclusion

The premium cost increase associated with a Return of Premium rider is a defining feature, as it allows policyholders to receive a refund of their paid premiums if they do not pass away during the policy term. Other options either misinterpret the rider's functionality or relate to different insurance provisions, making them unsuitable in this context.