Why Does ROP Get a Bad Name?

[bill3173]

WOW, how did you get the apps issued so fast? My Banner apps usually take 3 to 5 weeks.

Oh, trust me, not bragging, just happened to be current clients who wanted the insurance and did the exams and apps the same day. They are in their early thirties with no health history to drag them down - preferrred and preferred + ratings.

All three policies together might pay your water bill, those are the only ones that get thru easily for me.

 

[djs]

I wonder how important the premium really is with ROP. Assuming there is no cash flow issue, the more the cost, the more the dollar return. And from what I understand, the additional premium would have to earn from 5-7% tax free and guaranteed to match the return of ROI.

What am I missing?

Rick

I'm confused by this statement, but then, maybe I don't understand ROP well enough. I'm willing to learn.

As I understand it, ROP does not promise any growth of premium, instead, just the opposite. You get paid back in 20 years what you paid in today, effectively a much shrunken dollar. The carrier in turn, has free use of your money during this time.

If this is true, then it absolutely matters what the premium is. It helps keep the deflationary pressures of my dollars at bay if I can manage to give them fewer dollars up front.

The 5-7% is what you have to make if you invest the equivalent of the ROP premium yourself rather than having them do it for you. The carrier can get a much lower return (usually called profit) simply because many ROP policies lapse.

Dan

 

[m2788]

Just think about all the clients that don't have R.O.P. or term protections at all.

Lets keep it simple.

If you die, you get the money and if you don't die, you get all of your money back.

If you are planning on only keeping it for a few years, then don't waste your time buying a R.O.P.

I just know on my own policy at the end of the period, I'm getting all of my money back and I would have had 30 years of free insurance. If I decide to lapse the policy and lose the protection then that is my own fault.

My problem is that I want more things in life to have a R.O.P. after I get done using it.

Not just things like Home Owners Insurance, that I will never use, but everything.

I would be willing to pay almost double, if I get my money back at the end. My example is I pay almost $600.00 a year for home owners. I would be willing to pay $800 to $1000 a year and after 20 years, I don't have any claims, then I get all of my money back.

Also, for the agents that don't understand how to market a R.O.P. product, I say thank you. You make my job a lot easier to come in behind you. I'm going to keep drilling into the client do they want their money back or not at the end of the term period. But if you don't want to show them R.O.P. then I say again thank you and my agents and me own you a beer on us.

 

[moonlightandmargaritas]

I would have had 30 years of free insurance.

No, not really.

The additional money that you spent on the ROP rider has an lost opportunity cost attached to it.

$180 per year ($15/mo) for 30 years at 5% turns into $12,536. Subtract the $5,400 that you put in. You're left with $7,136.

That's what the insurance cost you.

 

[somarco]

Would you pay double or triple your HO premium to get it all back after 20 - 30 years?

How about double or triple your health insurance premium to get it all back (less claims paid)? Believe it or not, there were some carriers (other than Mega) that were offering that a few years ago. Of course they are no longer in the business.

Seems like some of the carriers in the ROP term business have discontinued offering that kind of coverage or have gone away. Does CNA ring a bell? I think they were in the ROP/mortgage term business for about 3 weeks before they quit.

Shenandoah was also in that market, as was Conseco.

To me one of the biggest concerns about ROP term is carriers going by the wayside and the assuming carrier refusing to honor the promise of the refund.

It can happen.

 

[HealthGuy]

Cincinnatti Life, AIG, Genworth, Life Investors, Fidelity Life - all selling ROP - all doomed to go out of business and not honor the contract....it can happen....I guess....but really???? Lets keep this discussion going.

 

[Crabcake Johnny]

Much ado over nothing. Our job is to educate - your client decides:

"Tom, I can offer you term and term with return of premium. Let me do the math and give you the pros and cons of both."

Where's the dilemma

 

[HealthGuy]

Right on John - much ado over nothing - But I though it was funny how much ROP was slandered...however lets all agree with this then ROP trumps whole life ANY day! How's that for adding fuel to the fire?

 

[Crabcake Johnny]

In some cases problems can arise when an agent's personal bias comes into play. I also have to work on this issue in several areas.

Go to Best Buy and only see one computer - you ask the rep and he says "after intense analysis we've determined this is the only computer we're going to show since we feel it's the best deal."

 

[m2788]

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Would you pay double or triple your HO premium to get it all back after 20 - 30 years?

Yes I will in a heartbeat. I want R.O.P. on everything, not just insurance.

If I was renting a house, and the landlord told me if I pay more rent to get my money back, after I move out. I would jump on it.


Not all agents are going to like R.O.P. or offer it to their clients or push it. I'm glad that they don't or I might not be able to come in behind them and make a sale. To those agents that don't get it, I thank you and a lot of agents do also.