TERM Forum - Conversion with ROP

[myinsurebiz]

How does conversion work with a ROP policy?

I'll make a call tomorrow to see - but, what are your thoughts?

 

[myinsurebiz]

How does conversion work with a ROP policy?

I'll make a call tomorrow to see - but, what are your thoughts?

Assurity has conversion in up to last 2 years of 20 - 30 Term or 65 to any of their WL in the same risk class . . .

Just curious.

 

[FinalExpenseDojo.com]

Why not do a paid up WL after the term is over? I believe Assurity & UHL do this. Where the cash back is used for a paid up WL. Not 100% tho.

 

[Allen Trent]

Why not do a paid up WL after the term is over? I believe Assurity & UHL do this. Where the cash back is used for a paid up WL. Not 100% tho.

You might want to double check. Many ROP at the end are RPU term, not RPU WL. Which could mean no dividends or CV growth like could be the case of the person converted to SPWL or was healthy & bought SPWL with the ROP lump sum.

Many at end of term have a default non forfeiture provision of Endowment paid as lump sum. Other non forfeiture options would be to annuitize as supplementary contract for lifetime income. Or, continue as Reduced Paid Up non participating term coverage. Lastly as Extended Term.

I believe RPU term is an entirely different animal than we are accustomed to with RPU WL in terms of growth in death benefit & CV from dividends

 

[Allen Trent]

How does conversion work with a ROP policy?

I'll make a call tomorrow to see - but, what are your thoughts?

Just like any term conversion privilege. If it has a conversion privilege you can convert a portion or all of the face amount as long as you convert prior to the conversion expiration date stated in the contract.

Maybe not all ROP have a conversion benefit, but the best should & do.

The cash endowment paid at end of the term is unrelated to the ability to convert the term face amount. I can choose to convert my term to a WL, a UL, IUL or SPWL of whatever product that ROP carrier sells. I can then choose to use none or all of the cash received from the ROP endowment toward the new coverted permanent policy or pay it from other income sources or assets

 

[Allen Trent]

Assurity has conversion in up to last 2 years of 20 - 30 Term or 65 to any of their WL in the same risk class . . .

Just curious.

So, are you saying they won't allow conversion in yr 19 & 20 of an ROP 20? That is a bit of an issue for the rep & client. Most clients won't know until they get the letter in yr 20 the ROP is over & many ROP have best growth in the Endowment amount in those final years.

 

[myinsurebiz]

Why not do a paid up WL after the term is over? I believe Assurity & UHL do this. Where the cash back is used for a paid up WL. Not 100% tho.

You might want to double check. Many ROP at the end are RPU term, not RPU WL. Which could mean no dividends or CV growth like could be the case of the person converted to SPWL or was healthy & bought SPWL with the ROP lump sum.

Many at end of term have a default non forfeiture provision of Endowment paid as lump sum. Other non forfeiture options would be to annuitize as supplementary contract for lifetime income. Or, continue as Reduced Paid Up non participating term coverage. Lastly as Extended Term.

I believe RPU term is an entirely different animal than we are accustomed to with RPU WL in terms of growth in death benefit & CV from dividends

I called and this was the short answer.

Once the Term period has been reached - the client is mailed a check for the ROP. They then can use that to buy into a SPWL - but, no guaranteed insurability.

Conversion - client can convert some or all of the Term to Whole Life with guaranteed insurability. If they don't convert all - then they lose the ROP on the part they converted. If they convert all - then they receive 100% of the earned ROP up to the point of conversion.

So - if someone has plans on converting - I'm not sure I could advise them to get a ROP policy.

Thoughts?

 

[myinsurebiz]

Assurity has conversion in up to last 2 years of 20 - 30 Term or 65 to any of their WL in the same risk class . . .

Just curious.

So, are you saying they won't allow conversion in yr 19 & 20 of an ROP 20? That is a bit of an issue for the rep & client. Most clients won't know until they get the letter in yr 20 the ROP is over & many ROP have best growth in the Endowment amount in those final years.

It says - " Client may convert to any Permanent Insurance product, with guaranteed Insurability up until 2 years before the term end on a 20yr or 30yr policy or before they reach 65 . . . "

 

[Allen Trent]

I called and this was the short answer.

Once the Term period has been reached - the client is mailed a check for the ROP. They then can use that to buy into a SPWL - but, no guaranteed insurability.
This is likely just the default endowment option. There may be 2-3 other pro active options the client can elect at the end of the the ROP as another non forfeiture option. Just like many WL non forfeiture option is extended term, a client could pro actively select a different option like surrender, payout annuity or RPU WL

Conversion - client can convert some or all of the Term to Whole Life with guaranteed insurability. If they don't convert all - then they lose the ROP on the part they converted. If they convert all - then they receive 100% of the earned ROP up to the point of conversion.
Not a deal breaker in my mind. If someone uninsurable with a 250k ROP in yr 13 of 20 has to forfeit a small fraction of the cash to be able to get a 250k WL at current age, it likely is best for them.

So - if someone has plans on converting - I'm not sure I could advise them to get a ROP policy.

You can't predict who will or won't convert for sure. If you bet on it to happen, you would only sell ART or 5yr term. Selling 20 or 30yr term wouldn't make sense if everyone was going to convert soon. But, we sell the proper duration term based on debt durations, dependents ages & income protection durations. If they convert a portion or all to WL in yr 7 of a 30 yr term they overpaid, but it is the right thing to do based on what you know at the time & realizing that most don't convert. Their are agents in our industry That sell mediocre ART term for great WL companies that I believe so a disservice to many clients by forcing term rates to go up in attempt to force more WL conversion sales

Thoughts?

 

[Allen Trent]

It says - " Client may convert to any Permanent Insurance product, with guaranteed Insurability up until 2 years before the term end on a 20yr or 30yr policy or before they reach 65 . . . "

Bummer. I am sure that is by design do the carrier is protected to only get conversions pro actively by agent or client & not have to allow conversions of those with their backs against the wall in yr 20 when they get the letter their coverage is ending. Another way our never ending push for cheaper is gutting the ability to continue products. Carriers used to design & price for people to keep their term even after level term period & convert. Now, premiums are astronimcal after level period & conversion privileges are much shortened, if any, compared to the past