A case for ROP Term

[Allen Trent]

They still have it. That's where I got that number from.

wait a minute. doesn't he dislike people paying more for term because most will lapse it & overpay & not get their money back. why would he supply a tool to make ROP look good if he believes almost all people lapse out term & permanent in the 1st 10 years

 

[Travis Price]

Well, I'm actually off the state of mind that spending it now is still a better option than the RoP. The money now is worth more, even if not invested.

By the time RoP kicks in.. Guys lost 30% of value due to inflation

But, the paid up to 95 makes up for that

 

[WinoBlues]

wait a minute. doesn't he dislike people paying more for term because most will lapse it & overpay & not get their money back. why would he supply a tool to make ROP look good if he believes almost all people lapse out term & permanent in the 1st 10 years

 

[Tahoe Ray]

Well, I'm actually off the state of mind that spending it now is still a better option than the RoP. The money now is worth more, even if not invested.

By the time RoP kicks in.. Guys lost 30% of value due to inflation

But, the paid up to 95 makes up for that

The math is the math.

Your ROR still needs to be north of 5% to beat the ROP.

 

[Robert Barney]

Also the ROP, being a Return of Premium, is not taxed.

Compulife used to have an option to show ROP v investing the difference. I have not use it in a few years so maybe @Robert Barney will run something.

See attached file. Assurity in this example has the best 30 year ROP premium, but I used the 30 year non-ROP premium for Assurity which was more expensive than the lowest alternative.

 

[Robert Barney]

wait a minute. doesn't he dislike people paying more for term because most will lapse it & overpay & not get their money back. why would he supply a tool to make ROP look good if he believes almost all people lapse out term & permanent in the 1st 10 years

You're right, I'm not a fan.

Having said that, in the early days of ROP there were some deals that were mind blowing good, and I know agents who bought large ROP policies on themselves. In retrospect, with low interest rates over the last 15 years, they are making out like bandits. People who bought certain no lapse UL products a few years ago also did VERY, VERY well. There are times when actuaries make mistakes and short the companies.

And while I KNOW most whole life policies lapse and are not in force for the whole of the insured's life, it doesn't mean whole life is not a useful product for some people. I've told others here before, I own some on myself.

 

[Travis Price]

The math is the math.

Your ROR still needs to be north of 5% to beat the ROP.

We're talking about two different things.

You're talking about the number of dollars, which you're completely right. I'm talking about the spending value of those dollars, which I'm also right.

It's apples and oranges. And math is only as good as the purpose you're trying to illustrate for...

The difference where the value of the money is + is the paid up option. Which the guy wanted, so while I wouldn't chose it because of future growth, BUT that's me. Personal finance is... Well... Personal.

You'll need 100k+ in 30 years to match the spending value of 50k today based on a 2.5% annual inflation rate.

 

[Allen Trent]

You're right, I'm not a fan.

Having said that, in the early days of ROP there were some deals that were mind blowing good, and I know agents who bought large ROP policies on themselves. In retrospect, with low interest rates over the last 15 years, they are making out like bandits. People who bought certain no lapse UL products a few years ago also did VERY, VERY well. There are times when actuaries make mistakes and short the companies.

And while I KNOW most whole life policies lapse and are not in force for the whole of the insured's life, it doesn't mean whole life is not a useful product for some people. I've told others here before, I own some on myself.

I agree. I bought the early ROP too when the up charge for the ROP was actual a rider for a much smaller cost than it is today. I am surprised carriers have not promoted an incentive to get those ROP to be converted to GUL or WL.

 

[Travis Price]

I agree. I bought the early ROP too when the up charge for the ROP was actual a rider for a much smaller cost than it is today. I am surprised carriers have not promoted an incentive to get those ROP to be converted to GUL or WL.

When I started selling, it was a rider too... I'd be more inclined to support it long term because it's super cheap to get your money back.

Today, if you're looking at efficiency and getting the most bang for your buck, I wouldn't buy it. The cost is just way too expensive and you're spending power is over halved.

Then again, that's me. I'm a little more aware of money and less risk adverse.

 

[Allen Trent]

See attached file. Assurity in this example has the best 30 year ROP premium, but I used the 30 year non-ROP premium for Assurity which was more expensive than the lowest alternative.

If that is an actual case that can be bought today, it could be great for your high income clients. A 4.73% tax free guaranteed 30 year return is the equivalent of 7-8% for taxpayers in the 35-40% fed/state/surtax rate without market risk. For someone that needs the base term coverage, already maxing out retirement plans, this would be better than taxable investments or low interest bank or bond money.

Only real risk for client is being dumb & lapsing early.