Return of premium rider
An ancillary benefit returning the premiums paid if the insured dies before the main benefit could ever be drawn.
A self-employed saver who dies during the accumulation phase of a Madelin retirement contract loses every contribution, because the Act of February 11, 1994 lets these French contracts pay out only as a life annuity. A return of premium rider deals with that case. An ancillary benefit, it pays back to beneficiaries all or part of the premiums paid where the insured dies before drawing the main benefit. Without it, the loss is sound in pooling terms, yet families find it hard to accept, to the point of deterring people from buying. Technically it is term life cover attached to the retirement savings contract, and its cost reduces the future annuity accordingly. The saver thus trades openly between heirs and lifetime income. It also appears in some loan contracts and in immediate annuities, as a reversion to a survivor or a minimum number of guaranteed payments. It answers loss aversion toward accumulated savings, which weighs more on a saver's decision than the mathematical expectation of the contract.
France's Madelin retirement contracts, created by the act of February 11, 1994 for the self-employed, allowed only a life annuity at maturity. The return of premium rider was the only way to keep a death at fifty-five from erasing twenty years of contributions. The retirement savings plan introduced by the PACTE Act of May 22, 2019 allowed a lump sum, which made the arrangement largely pointless.
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