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ROP Pays You Back!

admin — Wed, 20 Jan 2010 13:32:08 +0000

Return of Premium (ROP) Gives Back Money

What if you could purchase an insurance policy, be lucky enough not to ever use it, and then get all of your money back at the end. This would seem like a win-win situation. You would be protected, but if you never needed to make a claim, you could get all of your premiums back in a nice check.

Well, this situation does exist in the real world sometimes. You can find return of premium term life insurance policies. You will still purchase your policy to last for a specified amount of time, like 20 or 30 years. Then, when the policy expires, if nobody has collected on the policy, a check comes back for the amount of all of the premiums paid.

An Example of ROP at Work

Consider the situation of a 40 year old man who wants to purchase a 20 year term policy with a death benefit of $500,000. Now understand that premiums vary by age, health, location, etc., but let us just say his premium is $50 a month. You can calculate his total premiums for twenty years by multiplying 50 * 12 * 20 = $12,000.

At the end of his term, he is now 60 years old. He has not passed away, so while he may be happy to be alive, he still has nothing left to do with that life insurance contract.

But let us say he choose to purchase a return of premium rider when he bought his life insurance. Now this additional benefit will cost a bit more, so for the sake of illustration, we will assume it adds ten dollars to his monthly premium. Now you can figure that he paid $14,400. In the end it cost him $2,400 more. than the basic policy without an ROP rider.

But now, instead of having a worthless piece of paper, this man will get back a check for $14,400! This seems like a good incentive to keep a policy in force. Not only do you have coverage for the period of your policy, you also get to look forward to collecting your premums if you survive it. If you do not survive the policy, the normal death benefit would be paid out ot your beneficiaries.

The Cost of Return of Premium Term Life Insurance

You understand that this example just used some figures for illustration. You can run some quick and free quotes to compare life insurance costs.

What Is Mortgage Life Insurance?

admin — Thu, 06 Nov 2008 15:25:51 +0000

If your purchase a new home with a mortgage, or if you refinance your home, you are sure to get some offers for a product called mortgage insurance or mortgage life insurance. The card in the mail, or the phone call on your answering machine, will probably offer to protect your home mortgage in case of death, and maybe disability, and critical illness. In addition, you will see some mention of mortgage unemployment benefits.

In general a mortgage life insurance policy is a no medical exam term life insurance policy with a face value that matches your mortgage balance. Sometimes other obligations are added in too, since there is really no rule about having the face value matching a mortgage in most cases. In some cases, this is a decreasing term life policy since the premiums will be lower since the coverage gets lower as time passes, matching a lower loan balance.

Sometimes the policy offers a ROP Term Life Rider which will actually refund the premiums if the insured person survives the policy. The unemployment benefit on most mortgage insurance policies simply pays the premium during unemployment, though other forms of mortgage unemployment benefits are available.

Return Of Premium Term Life Insurance

admin — Wed, 05 Mar 2008 21:40:01 +0000

Compare Term Life Insurance With Return of Premium (ROP)

We put up a new page on Return of Premium Term Life Insurance. We would like to explain this a little more here. Return of Premium (ROP) is actually a rider you can select to add to some term life policies. It costs a little more, but you do get a big benefit. So sometimes a rider can cost more, but it can leave you with more money in the long run.

Let us say you purchase a 30 year term policy with $200,000 of death benefits. If you pay your premiums for 30 years, you have coverage in case you die. But if you do not die, your policy has turned into a worthless piece of paper at the end of 30 years. You can consider yourself lucky to be alive though!

But consider an example of purchasing that same 30 year term policy with a ROP rider. At the end of 30 years, if you kept your policy in force (paid the premiums), you will get a check back for every cent you spent! How much luckier is that?

Look at Ms. Davis who purchased a 30 year term policy with a $250,000 death benefit when she was 32. Remember that I am just using some example numbers, so do not think these represent actual premium prices. But let us say her monthly premium for term life is $32. If she choose the return of premium rider on her term life policy, she would pay $5 a month more. So that would make her term life with return of premium cost $37 a month.

With just the term policy, she could make it to the age of 62. After having paid over $11,000, she gets to tear up her policy. What if she had decided to pay extra for the return of premium benefit? Well, she would have paid more. She would have paid over $13,000 over 30 years. But, at the end of that time, she can collect a check for that amount back from her insurer!

This can be a handy tool for retirement planning too. You have purchased coverage for your working years when your mortgage must be paid off and children have to be supported. Then, when you face retirement, you can get a handy check to help you fund your accounts. Or sometimes, a year or so before the term policy will expire, insurers will offer to convert to whole life so you can use your check to fund retirement life insurance. A seniors life insurance policy is usally a smaller face value whole life policy that can pay for final expenses.