What is ROP?
The ROP or Return of Premium Rider is something that took the industry by storm almost a decade ago. Insurance companies structure ROP programs in 15, 20 and 30 year term policies, they are not offered for 10 year term policies. The purpose is that at the end of the term, the insured will receive all the premiums they paid into the policy back in a tax free one lump sum check. Thats right, all your money back! Hence “Return of Premium”!
Sound Good? Finish Line Insurance Services proudly represents a number of companies who offer competitive Return of Premium programs. Ask us if ROP is right for you!
What is the Advantage to ROP?
The advantage to an ROP program as that you do actually get every penny that you paid into the policy back in one check. The insurance you payed for will have served it’s purpose by giving protection during the length of the policy term you desired when you bought it. At the end of that term a check arrives in the mail for all the premiums that were paid in full. Some people think of ROP as a forced savings account. Not a bad idea if you ask me. 
You may ask yourself: How is that Possible? Well it’s simple, the insurance company first off will charge a premium nearly twice the price of a standard term policy. That way they can invest your money for up to 30 years (assuming a 30 year term). At the end they just refund you back the principal and retain the interest they accumulated during the life of the term policy. It really is a win/win situation. You get your money back and have virtually received free insurance (assuming you do not pass away), and the insurance company retains all the interest they accumulated without having to pay out there own principal or a death benefit.
What are the Disadvantages to ROP?
The first hardship people find when considering an ROP program is accepting that the premium will be considerably higher than the premium in a simple term policy of equal length. Depending on the amount of insurance the client requires, the premiums can often be more than twice that of a simple term policy.
The second disadvantage is that if for any reason the policy lapses in the first 15 years, the client looses all the stored up premiums and receives nothing. Depending on the insurance company, the refund may be pro-rated after 15 years but this is not a guarantee.
Finish Line Recommendation
We recommend that if you are considering an ROP program that you make sure you are comfortable with the monthly premium. Getting your money back is very attractive to people, but you need to be confident you can stick with the program throughout its duration. We also recommend that you consider other forms of Universal Life Insurance along side the ROP program to make sure there is not a better program with more flexibility that may fit your needs. At this point we enter the conversation of using insurance as an asset rather than an expense. Planning these types of programs takes time and attention to detail. Call us today to see if an ROP program is right for you. This is the part of life insurance that gets fun, please call us to sit down and design a program that makes you smile. Please Introduce Yourself!
