Is An Rop Life Insurance Policy Worth The Extra Money?
Posted August 30, 2009 – 5:13 pm in: structured settlements FAQOr is a standard policy sufficient? I know I could look up the differences to learn a little more to make my decision, but I’m really wanting to hear personal opinions on this matter as to whether or not others find this to be worth the money. Getting any opinions from those who have this option on their life insurance, or who have experience with this would be great!
Thank you!
4 Comments
ROP is an insurance company rip off. Like the one respondent said, the ROP in the contract or as a rider makes the insurance company money. Does it make you money? Um, NOPE!!! If you or your beneficiaries get the ROP back, there is no interest paid. But I guarantee the the company made their money from the amount extra that you paid.
Stick with level term. Term is temporary and meant to be that way. It is temporary be cause you should be investing at the same time. At the time that you have as much in savings as you do face amount, you have become self insured. Once you are slef insured, you do not need the insurance or you drop some coverage, thereby freeing up more money for investing.
We are mandated to pay insurance on our homes and cars. We don’t have the same mandate on our families. This is something I have seen here on Answers as a reason why not to have insurance. So if you get car and home insurance but do not have life insurance does this not tell people that you love your homes and cars more than you love your families?
Please see the below related link regarding whole life policies, VUL specifically.
I found the article linked below interesting relative to your question.
Personally, I would do the math. How much would a standard term policy cost over the life of the policy? How much would the ROP version cost? I guarantee you the insurance company will make money or they would not do it.
Whatever you do, stick with a term version. Whole life policies are much more expensive and the rate of return is a joke.
I’ve seen several ROP options out there; one adjusts the rates to account for ROP, the other is a rider on the policy adding a flat amount per month. . The ROP where rates are adjusted is priced very closely to where a Universal Life policy would be to return the premium as a cash value; since I feel UL is overpriced to begin with, I’d say these type of ROP policies are too expensive for what you get. The rider seems to be a better deal but will depend on the rate the insurer charges you and that varies; if someone were to offer me ROP on my 20 year term policies for a reasonable amount (say $10-$20 month extra) I’d go for it. Look as prices from a variety of companies and decide for yourself if it’s worth it.
It’s a good idea if you are not a disciplined investor. Most people would be better off with ROP than their current plan (most people don’t have a plan). Also search Y! Answers for similar questions to see what other factors to consider.
Make sure if you buy an ROP term the conversion privilege lasts for the entire duration of the level premium. A conversion privilege allows you to move from a term to a permanent policy without having to prove your insurability. This is an important feature if you are diagnosed with heart disease, diabetes, MS, etc and live.