Rhode Island Life Insurance Practice Exam

What type of life insurance policy is a Return of Premium policy classified as?

1. Term life and Whole life

2. Whole life and Increasing term

3. Universal life and Variable life

4. Whole life and Endowment

The correct answer is: Whole life and Increasing term

A Return of Premium (ROP) policy is classified as a type of term life insurance. However, it is designed specifically to return the premiums paid if the insured survives the term of the policy. The key feature that distinguishes a Return of Premium policy is its mixture of term insurance characteristics with the benefit of premiums being returned if no claim is made by the end of the specified term. In contrast, Whole life insurance provides coverage for the lifetime of the insured, with a cash value component that grows over time. While ROP has elements of a term policy, it is not categorized as Whole life. Therefore, although ROP policies incorporate a type of term coverage, they are not classified as Whole life or Increasing term insurance. This understanding clarifies why the classification with Whole life and Increasing term is not the suitable classification for ROP policies. Increasing term normally involves a death benefit that grows over the duration of the policy, which is not a feature of ROP. The return of premium aspect emphasizes the temporary nature of the coverage while still appealing to consumers who want their payments to result in a tangible benefit if they outlive the policy. In summary, ROP is strictly tied to its term insurance feature, and it does not align with other policy definitions in