Return Of Premium Life

Jun 15, 2008

  1. JCK818
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    JCK818 Guru

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    Can someone please explain to me how does the Return of Premium work? does the client get everything back at the end of the term? I'm thinking there is more to it?
     
    JCK818, Jun 15, 2008
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  2. STIBROKER
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    STIBROKER Like My post and enter the DRAWING,,,, Moderator

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    have you ran a illustration and read it....
     
  3. JCK818
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    no i have not...we are not set up with any companies that offer that yet.
     
    JCK818, Jun 16, 2008
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  4. Newby
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    Newby Guru

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    Yes, they get 100% back if they keep it the full term. They are paying extra in for that feature. It's for people who don't like the thought of paying in money purely for the insurance benefit.

    The downside is; if they cancel the contract early, they get a pro-rated amount back (not 100%) and if they die and collect the death benefit, they paid much more for the coverage than they needed to.

    If they just bought the cheapest term and invested their own money they will USUALLY be better off (not always because some investments perform poorly.)

    It has a place but it's definitely not for everyone.
     
    Newby, Jun 16, 2008
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  5. xrac
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    xrac Guru

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    My description of ROP is it is compromise in between term and whole life. As Newby said "It's for people who don't like the thought of paying in money purely for the insurance benefit."
     
    xrac, Jun 16, 2008
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  6. moonlightandmargaritas
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    moonlightandmargaritas Guru

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    It's another "sucker bet" designed by life insurance companies to make term insurance even more profitable for them than it is now...
     
  7. mcday
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    mcday Super Genius

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    I'm no expert on ROP... I think there are some companies that only give you back your term premiums and NOT the extra amount you paid in to get the ROP benefit.

    Has anyone heard this?
     
    mcday, Jun 16, 2008
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  8. Delta76
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    Delta76 Guru

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    I have only sold a few and that's when it has been requested. Sometimes I'm suprised at the guaranteed rate of return when you measure the ROP premium vs the pure term premium. In some cases, I have seen it as high as 7% for 20 year term, but more often than not, it's in the 4% to 5% range.

    A guaranteed 7% after tax return isn't bad, but there are some downsides:

    -cancel the policy early as suggested already
    or
    -very likely, as term rates keep going down, the client will be locked into paying higher premiums than necessary for the life insurance protection than necessary.
     
    Delta76, Jun 16, 2008
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  9. JMO Fan
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    JMO Fan Guru

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    ROP Term is an old gimmick, more recently popular. The carrier is confident of earning enough interest on the extra premium to refund all at the end of the level term. This includes assuming some will lapse & get nothing (or die & get the benefit).
     
    JMO Fan, Jun 16, 2008
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  10. JRoot
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    JRoot Guru

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    I have only sold a couple ROPs as requested by the prospect.

    If your prospect wants ROP, look at 20 and 30 year term rates, then compare them to 20 and 30 year ROP. You'll see that 20 year ROP is substantially more expensive than 30 year...not in total premium, but in cost of insurance.
     
    JRoot, Jun 16, 2008
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