Final answer:
The life insurance rider that refunds the total amount of premiums paid if the insured dies within the term specified by the policy is known as a Return of Premium Rider. This rider is commonly attached to term life insurance policies and offers the dual benefit of death protection and a potential return on premiums paid.
Step-by-step explanation:
The life insurance rider that pays an amount equal to the total premiums paid if the insured dies within a certain time period, as stated in the policy, is commonly known as a Return of Premium Rider. This type of rider is an addition that can be included in some term life insurance policies. It ensures that if the policyholder passes away during the term specified in the policy, not only will the beneficiaries receive the death benefit, but they will also be refunded the total amount of premiums paid for the coverage. This can be particularly appealing for those seeking both a death benefit and a potential return on their investment if the insurance is not ultimately needed within the stated term.
Cash-value (whole) life insurance has a death benefit and also has a cash value component. This allows policyholders to accumulate an amount that can serve as an account for their use, unlike term life insurance policies that typically do not have a cash value aspect. However, it should be noted that a Return of Premium Rider is typically associated with term life insurance.
Understanding how riders like the Return of Premium Rider work is essential to effectively manage life insurance policies and to ensure that policyholders are fully aware of the benefits and cost implications of their insurance choices.