What's the math formula to calculate IRR for ROP Term?

[ManyLeads]

Can someone breakdown how to do the math to show the IRR on ROP for me? I'm a bit rusty with my math! Thank you in advance.

 

[Tahoe Ray]

Can someone breakdown how to do the math to show the IRR on ROP for me? I'm a bit rusty with my math! Thank you in advance.

Carrier quotes for ROP normally do this for you.

However, take the non-ROP cost and subtract it from the ROP cost. Take that result and dump it into a TVM calculator and use 0 as the present value, negative whatever that difference is, future value is the returned premiums, years are the term, and solve for rate.

So, for a 30yo male PfNT, Banner is 754/mo for 30 year term. Assurity is 1540. The difference between the two is: 1540-754=786. Total ROP is: 1540x30=46200.

Your calculation will look like this:



Which is the tax-free rate or return needed to eclipse the ROP had you invested the difference.

Hope that helps.

 

[ManyLeads]

Awesome, thank you Tahoe Ray!

 

[Tahoe Ray]

Awesome, thank you Tahoe Ray!

No problem. But like I said, if you get official carrier illustrations, most will have a marketing piece highlighting the IRR.

Here is an example from a disability quote with ROP that I ran today:

 

[ManyLeads]

Awesome! Who are your favorite carriers to write ROP with? Also, what percentage of your sales does ROP make up?

 

[WinoBlues]

What that Guru T-Ray said. Just a note: the ROP is Guaranteed per the illustration.

 

[Tahoe Ray]

Awesome! Who are your favorite carriers to write ROP with? Also, what percentage of your sales does ROP make up?

Very little. 5-7%?

ROP is niche and I really pick and choose who I present it to.

That said, I like Cincinnati life for ROP. Assurity has a product as well. There just aren't a lot of ROP options.

For disability, Illinois Mutual.