Return of Premium...???

Discussion in 'Disability Insurance Forum' started by Mike Siegal, Jun 5, 2017.

  1. Mike Siegal
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    Mike Siegal Well-Known Member

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    Hi Friends,

    Newby with a general question: Are there DI companies that offer a return of premium?

    I'd expect most of the premium would not equate to any cash value but, it seems like it would be a great selling feature. "Mr.Prospect, if you never use your policy or make a DI claim, you get X back!"

    Anyone know about this?

    Appreciate any info you can share.

    Thank very much ~!
     
  2. Tahoe Ray
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    Tahoe Ray Well-Known Member

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    Illinois Mutual and Assurity.
     
  3. DHK
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    DHK Well-Known Member

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    Mutual of Omaha also has a 50% and 80% ROP rider that you can exercise every 10 years (last I recall).
     
  4. yankee466
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    yankee466 Well-Known Member

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    It makes it a much more expensive policy....but it does exist.
     
  5. DHK
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    DHK Well-Known Member

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    "Expensive" is always relative in the insurance world, isn't it? Yes, the premiums would be more expensive on an ROP policy.

    Let's suppose that a non-ROP policy cost $300/month, and an 80% ROP policy cost $550/month.

    At the end of 10 years, the non-ROP policy cost $36,000 ($300 x 12 x 10).

    Yet, the 80% ROP policy after 10 years would've charged $66,000 ($550 x 12 x 10), but refunded 80% or $44,000 for a NET COST of $22,000.

    Now, which one is cheaper?
     
  6. dgoldenz
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    dgoldenz Moderator Moderator

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    That doesn't account for the time value of money and if you have any DI claims during that time, they are usually offset against the ROP. I've never found it to be a good deal or had any clients willing to pay for it.
     
  7. VolAgent
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    VolAgent Well-Known Member

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    Wow, that would be such a fun conversation to have with a client out on claim. :swoon:

    Even if you had told them and put it in writing when they applied, they still will have forgotten.
     
  8. DHK
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    DHK Well-Known Member

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    I'm willing to bet that you didn't apply "time value of money" when choosing the kind of car you drive, house you bought, or many other purchases... or one would always choose the cheapest option.

    While DI is not a product one "enjoys", nor does one PLAN on becoming disabled, at least it provides the peace of mind that you can have income if needed and get the majority (or all) of your premiums back with an ROP rider.

    While you don't get an additional 'return' on your money, at least you have coverage during that time.
     
  9. dgoldenz
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    dgoldenz Moderator Moderator

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    Sorry I should have phrased that better....if you have any DI claims, the amount of the claims paid are usually used to reduce the ROP payout. The claim itself would not be reduced.

    I apply time value of money to major financial purchases because I could invest that money instead. So rather than paying twice the price for an ROP policy, i could invest the difference, have access to all of my money, and not have to worry about getting it back from the insurance company.

    DI is generally expensive enough without an ROP rider that people aren't going to double up the premium just to try to get their money back every 5-10 years. I think Met had something like 1% of all policies sold with an ROP rider when they offered it, so it's obviously not something people are really looking for.
     
  10. VolAgent
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    VolAgent Well-Known Member

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    I knew that is what you mean. Still not a fun conversation.

    "Yeah, so your return of premium was eliminated because you became disabled 2 years ago. Sorry, but all that extra premium, the company kept it. Guess you shouldn't have bought that ROP rider."
     

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