Return of Premium
Imagine getting a money-back
guarantee on your Term Life Insurance: Your family
receives a lump sum of money if you die, but if you live
the company returns all of your premiums!
Believe it or not, such a
product now exists and is just one of the innovative
solutions coming your way from some of the best insurers
in the business. It’s called Return of Premium (ROP) and
its aimed right at one of the greatest consumer
objections to pure life insurance: "I’m probably not
going to die, and my money will have been wasted."
Before this innovation,
life insurance was available in two forms: Term
Insurance and Cash Value Insurance.
Term Insurance is cheap
and easy to understand (which explains its proliferation
on the Internet today). With Level Term Insurance, you
know exactly what the premiums will be for a fixed
number of years. It’s very affordable life insurance
protection, but you get nothing if you outlive the
policy.
Cash Value Insurance, on
the other hand, includes pure insurance coverage –
guaranteed renewable for your whole life – along with an
investment component to build cash value. Building cash
value, however, means paying higher premiums. While an
unused term policy can feel like a waste, a cash value
policy can often cost two or three times as much for the
same coverage.
Return of Premium (ROP)
Term is an elegant and effective new solution that
splits the problem up the middle. It starts out like
Term Life Insurance with one extra promise from the
insurer: If you pay your premiums and you live, we’ll
give you your money back. On a typical 20 year Level
Term Life Insurance policy the ROP feature could cost
about 30% more, but that extra premium will effectively
earn you a 6-7% return over the 20 years -– just enough
to earn you back everything you’ve paid in. What’s in it
for the carrier? LOYALTY. Carriers spend a lot of money
to get your policy, and only start making a profit if
you stick around more than five years or so. ROP
guarantees that lots of customers stay for the full 20.
And, for those that don’t, the carrier made an extra 30%
on those guys -– and used some of it to pay you a solid
return on your money. So if you know that you are going
to be insured for the long haul, then think about
tossing in a few extra dollars and getting it all back
in the end.
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here
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