Calling ROP Free Insurance?

[DHK]

So, let's do the classic A vs B sales presentation.

You need $1,000,000 of life insurance, and you have $2,000/year to buy it.

Would you rather have:

Option A: $2,000/year premiums... $0 cash value, but at the end of 20 years, you get all your money back when your policy expires.

Option B: We do $2,000/year in premiums, but we do a combination of a $50,000 permanent policy + $950,000 term rider. Your permanent policy will grow with dividends (or indexed interest credits) and you'll be building a cash value that can be used for various other things. Over time, we can continue to convert that $950,000 into more permanent coverage. Oh, and that term rider? Will typically be less expensive than buying a separate policy.

Let them choose.

 

[WinoBlues]

Some ROPs I have in force do have access to a portion of the ROP starting a few years in. it is a sliding scale usually about 50% at year 25 (30 year plan) then increases rapidly to 100%.

Edited: replace Any with Some. Any is to broad

 

[rousemark]

I look at it more favorably with DI or CI... because there is a (good) chance that you may never need these coverages.

And many times, even if you keep the policy, the policy will expire as you age.... so if you can get all (or most) of your money back from the premiums... go for it.


For the same premium, I could probably find a perm/term blend that'll grow a cash value compared to an ROP Term.

I don't do this "buy term and invest the difference" nonsense.

This is Family Life's EZ Issue Term so the premium is high since it is simplified issued: 250K 30 years, 35 year old male NT. No ROP $692.50, with ROP $1222.50. The client pays $530 per year more for 30 years, total $15,900.. Cash Value at the end of 30 years is $36,665.. That is 5% return on the investment above the cost of insurance.. not too shabby.

 

[WinoBlues]

Compulife has a nice ROP analyses feature

 

[wln417]

First, there's lost opportunity cost. And some companies only return the annualized premium, so if your annual premium would be $1,000 for 30 years but you finance it by paying, say, $87.50 per month, you'd only get back the $30,000 not the full $31,500 you paid in. Then there's inflation, so at say at even a 2.5% annual inflation rate, the $30,000 would only be worth a bit more than $12,000 in today's dollars.

Other than that, yes, it's FREE!

But people will buy it, even at the higher cost, because at the end, they will get something back. If that's what it takes for someone to buy instead of not buy, then I'm all for it.

The best life insurance is the insurance that is in force when someone dies.

 

[DHK]

Don't you have to cancel the policy to access the accrued values?

Wouldn't that be more of a "surrender value" than a cash value?

 

[WinoBlues]

This is Family Life's EZ Issue Term so the premium is high since it is simplified issued: 250K 30 years, 35 year old male NT. No ROP $692.50, with ROP $1222.50. The client pays $530 per year more for 30 years, total $15,900.. Cash Value at the end of 30 years is $36,665.. That is 5% return on the investment above the cost of insurance.. not too shabby.

Net.

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Don't you have to cancel the policy to access the accrued values?

Wouldn't that be more of a "surrender value" than a cash value?

No. Not with all plans. We have also used them to pay premiums.

 

[FEsalesNC]

Got it. I will run the numbers first. Thanks

Nope. Not in all or even most cases. Depends on the carrier and the contract. Example. Cincinnati Life's older ones returned all premium paid including riders. Which made the RdPd option in the end pretty strong up pretty strong. Today their newer plans only return the base premium. Which is higher since most ROP plans have increased their premiums. As a side note they are very sticky plans persistency wise. I reviewed an old People's Benefit Life I have on a client that is getting close to his term date. The $65,000 ROP at the end is what is keeping him keeping it.

 

[WinoBlues]

I am much more about Reduced Paid up policies at the end of the term than the ROP. A paid up small policy at about retirement has more value to me than a smaller amount of cash values. However, I let my clients decide.

 

[rousemark]

I am much more about Reduced Paid up policies at the end of the term than the ROP. A paid up small policy at about retirement has more value to me than a smaller amount of cash values. However, I let my clients decide.

Washington National has RPU has an option on their SI term.. The policy returns 50% of premiums paid or A RPU slightly more than premiums paid. If their health is till reasonable and you ahve a company that only returns the cash, you could always sue it to buy a SPWL.. For the young agetns that stay in the business and take fo their clients, that would be another sale down the road if the term had never been converted.