Comments on: What is Return of Premium Life Insurance?

By: Greg

Greg — Thu, 26 Jan 2012 07:59:31 +0000

Every company in the world (capitalist world, I guess) exists to make money, Kirk. Unless they don’t, then they wouldn’t last long. The margins are lower than most products you buy too. Do you think your shoes or car cost anywhere near what you paid for it? Does that mean the car company is screwing you?

The benefit of protecting your families financial future in the event of tragedy is well worth the cost for most people. If it’s not to you, don’t buy it. Just like you don’t have to buy that $100 pair of shoes that cost $10 in material and labor.

By: Greg

Greg — Thu, 26 Jan 2012 07:51:48 +0000

Smartest comment on this board.

By: Greg

Greg — Thu, 26 Jan 2012 07:49:15 +0000

I don’t know what world you’re living in but 5% is waaayyyy above inflation these days and is well above what the S&P 500, most mutual funds, your 401k…etc, etc have done in the last 5-10 years. You’re not living in the 80s anymore buddy. No one is making 8-12% per year anymore. Plus, you pay taxes on the return you make on your own investments. You didn’t pay taxes on any of the interest that the insurance company used to provide your insurance. ROP is a good deal for most people not named Warren Buffet.

By: Greg

Greg — Thu, 26 Jan 2012 07:37:41 +0000

Yes, the insurance companies plan to make a spread on the investment but its generally win-win for both parties. Insurance companies can hire better money managers than you or me or our financial advisors so they can still give an attractive return to us, virtually risk free (your investments are not guaranteed to make that “attractive return” you speak of), while keeping a small spread as profit.

By: Nick

Nick — Sun, 27 Mar 2011 04:50:31 +0000

People like you are the reason our country is in the mess it’s in. Own up and take some responsibility. If you don’t want life insurance, thats fine with everyone, but saying that “all” insurance is a racket is extremely short-sighted. Take “car-insurance” for example. Next time you’re hit by someone who doesn’t carry insurance have fun dealing with the cost of repairs on your own. Or worse yet, still owing money on your totaled car and having to buy another on top of that. If you don’t have health insurance, that means when you get sick and run up hospital bills everyone else has to “bail you out” Show some responsibility and take accountability for life and actions and how they affect others. One final note, you show your lack of education when you say that insurance companies payout claims of “1%” Look up the P&L of any public insurance company and you may be surprised to find that their margins are a little worse than 99%!

By: pavjason

pavjason — Fri, 04 Mar 2011 00:31:45 +0000

What about having to pay taxes on the ROP after the term is up? What tax rate would this “income” fall under?

By: MikeR

MikeR — Wed, 08 Dec 2010 16:01:38 +0000

I looked into the Return of Premium Life Insurance.

For me it didn’t make financial sense.

I was able to get a 30 year term for $29 per month. ($10,440 total cost)

The same $500k 30 yr Return on Premium would have been $109 per month. ($39,240 back)

I don’t know why they quoted me so much higher.

If my family uses it, either way they get $500k.

However… in the mean time I’m saving $80 per month.

So 1st year = $960 each year I am going to save that. – $28,800

Now I can cancel/change my policy without forfeiting extra money. I can also invest that money and if I can make 4% per year (VERY TOUGH in this economy for guaranteed return) then I will come out WAY ahead.

I just like having the extra money each week instead of them holding it. But hey, some people like paying extra taxes each week and getting a bigger return in their taxes too.

To each their own. I like having my money and paying off anything that charges interest (like my mortgage).

By: Jeff

Jeff — Sat, 23 Oct 2010 20:36:50 +0000

If you invested your money for each kid that you have when they were born or even now, than by the time they were older they would be way ahead of the game. Your not the only one that could have investments. Its a scare tactic that seems to work on a lot of people. Sure you don’t know what life can bring you, but your ok so far. Don’t bet on death, bet on life.

By: Jeff

Jeff — Sat, 23 Oct 2010 20:26:36 +0000

sounds like your an agent. Or at least trying to feel better about an insurance company getting your money month after month for years.

You lived how many years before you even thought about buying life insurance and you were fine. I agree with investing the money and paying attention to what your doing? Sure life happens, but most policies don’t even pay out.

It’s a scare tactic of the unknown future, but you’ve been fine so far.

Practice preventive health.

By: WJJ

WJJ — Thu, 19 Aug 2010 01:30:32 +0000

I think the insurance companies that market ROP insurance is hoping the client is not smart enough to do the math. For instance – ROP insurance cost 30% or three times as much as traditional term. So for the sake of argument less say a traditional 30 year term policy cost $125 per month and the 30 year ROP policy cost $375 ($125 x 3) If the company invest the difference of $250 over the 30 years and average a 10% return, they will make almost $600,000, so of course they will be glad to give back the $135,000 of premiums. Their profit is $465,000. Why not purchase the $125 traditional term policy, Invest the $250 in a diversified mutual fund yourself and keep the $600,000 for your family instead of making the insurance company wealthy. At the end of the 30 years, your mortgage should be almost paid if not completely paid, your children should be grown and on their own and you shouldn’t have a big pile of debt. Therefore, you shouldn’t need a heck of a lot of insurance at that time; However if you do out live the 30 year policy you will have/need the $600,000. Which would you rather have $135,000 return of premium or $600,000 cash? If the investment average a 8% return it would still be around $390,000 return which still beats $135,000 return of premium.

By: JJW

JJW — Wed, 09 Jun 2010 17:26:27 +0000

I guess I can understand why people with families might want life insurance. For me there is no sense to it. I have plenty of friends but I am single, I have no kids and I don’t plan on ever having any. I have a total of 3 people in my family and 2 of them are over 80 years old. Why would I want life insurance? Who would I make the beneficiary? Why would I care what happens after I die? Paying for a policy would be a total waste of money. I resent insurance advertising and sales pitches that say everyone needs life insurance. Ummm, no, they really don’t.

I’ve had nothing but bad luck with insurance companies all my life including health, auto & home. I pay and pay and pay money every month for years on a policy and never need it. Then when something does happen, the insurance company weasels out of any responsibility by saying “we don’t cover that.” No matter what it is, all they have to do is say “we don’t cover that” and they get out of paying anything to anyone.

Insurance isn’t protection, it’s a con game and a racket. Insurance companies take in literally trillions of dollars from policy holders yet they only pay out 1% in compensations. It’s unbelievable how state and local governments make it a law for people to buy insurance. Can you imagine the government making it a law that everyone had to buy MacDonald’s hamburgers? I’m sure MacDonald’s wouldn’t mind. Neither do the insurance companies.

It is amazing how pro-insurance brainwashed people are today. They think because they pay for a policy they have piece of mind and protection. They don’t. They’re just making deposits into someone else’s bank account. No thanks, I’ll take my chances with fate. If I’m wiped out financially by some disaster, the government will bail me out anyway. so, why pay for insurance? I’ll let all the suckers do that for me.

By: T

Fri, 16 Apr 2010 23:40:23 +0000

I agree with Layne and Anonymous. I am an independent investment advisor and have regularly presented all types of life insurance to clients. Life insurance is a valuable tool for estate planning and protection for those financially dependent on the earnings ability of the insured. Everyone has a different need and thus there is no universal solution or answer concerning what is considered a suitable insurance policy. Insurance was designed to fulfill a specific need, unique to every individual and family.

In regards to the debate about buying a more affordable policy (aka term) and investing the savings into an investment vehicle that could generate a higher rate of return over time, there are too many unknown variables to assume to make this type of declaritive statement.

Yes, theoretically, you could average 6-10% of interest over time, thus generating more income on your own but this depends entirely on the sequence of returns of your investments. Look at various Monte Carlo simulations and you will see that it truly is impossible to determine an average rate of return. Consequently, because of this inability to predict, one cannot make a generalization whatsoever.

Insurance was designed for peace of mind and protection. ROP is an interesting concept and although I have not recommended it to any client, that does not mean it does not have a place in the insurance marketplace.

By: billy d.

billy d. — Thu, 25 Mar 2010 15:32:44 +0000

am going through this right now on a ROT policy one of my clients has that is 3 years old. First and foremost I am a firm believer in the new ul guaranteed death benifit contracts. Can’t outlive them and unlike most whole life policies there are not stratosperic premiums to fund it. To me most W L polies are slow decreasing term policies as in 90% of the policies the death benifit is level and the cash value is treated as part of the DB.

Back to ROT. Have an investment advisor that is telling this client that the ROT is no good.
I firmly believe that acurarial tables give the companies good indication that a staggering number of people that have preferred plus ratings will outlive there term polcies. His suggestion is to buy a 20 year term policy where they will save appoximately $50.00 a month. That Extra $50.00 a month will be worth $38,000.00 to the client in 17 years and I would say the odds are close to 95-100% that the insured will still be alive. Taking future value factors into play he would need a guaranteed return of over 14% to approach the $38,000.00 If you stick in the taxs with conventional investments the return needed is higher. Oh Yes these individuals also have a gdbul. which guarantees them coverage to age 121

By: WKCS

WKCS — Tue, 16 Mar 2010 14:45:02 +0000

Mark- what would it matter if you could invest the money for 30 yrs instead of buying term and you died tomorrow, and you’re wife/loved ones needed money now, not 30 yrs from now???? how are you going to invest for 30 yrs if you’re dead? good planning. some of you are missing the point…term or any life isurance is PROTECTION first. plus, there is NO WAY you’re going to have more money or anything close at the end of 20/30 yrs by investing a few hundred $$ a year, if you buy term. the focus should be on the planning in relation to your own personal goals and needs, not “well, should i invest the money or buy term?” that is so ridiculous to hear. if you planned with a professional, that question answers itself. what if you’re dead????? pretty sure your family, if they rely on you, would think your plan wasn’t so well thought out. one more thing for those who think it’s wrong for insurance companies to make money… how else would they pay out claims???? we give our money to all kinds of different companies who use it to expand and grow bigger, that is a good thing…

By: Rick

Rick — Mon, 15 Mar 2010 17:02:46 +0000

I think the insurance companies are also banking on the fact that a large percentage of term life polices never reach full term before being cancelled due to lack of payment. If you can collect a 20-50% premium while the policy is in force why wouldn’t you?