What is the key characteristic of a Return of Premium Rider?

The key characteristic of a Return of Premium Rider is that it allows for the return of some or all of the premiums paid if certain conditions are met, such as the policyholder's death or the expiry of the policy. This rider is designed to add value to a life insurance policy by ensuring that if the insured does not use their coverage (for instance, they survive the term of the policy), they will receive a benefit by way of premium reimbursement.

This feature is attractive to policyholders as it mitigates the risk associated with paying premiums for coverage they might never use. It encourages individuals to maintain their insurance because, in effectively purchasing the rider, they can feel more secure in their investment.

In contrast, other options do not accurately define the purpose or characteristic of a Return of Premium Rider. For example, returning all premiums only upon reaching age 65 does not accurately capture the general application of such riders, which can be in effect regardless of age, contingent instead on the criteria outlined in the policy. Cancelling premiums if the insured remains healthy misinterprets the rider's function, and providing a bonus for premium payment does not align with the return of premiums, rather it suggests a different incentive structure.