The Rising Popularity of Return of Premium Term Life Insurance
September 2006 / LifeInsDirectory.com editorial staff

There is a debate that has long been raging in the world of life insurance sales: Term Life Insurance versus Permanent Life Insurance.  The two camps even have pet names for each other-- "Termites" and "Permites".  The fight has gotten much harder for the Permite camp with the addition of a new form of term life insurance-- Return of Premium Term Life Insurance (also called ROPTerm).

I suppose the staff at LifeInsDirectory has responsibly fallen somewhat firmly into the "Termite" camp.  We've always listened carefully to our customers about what you need.  The truth is everyone wants cheap life insurance... but a top notch life insurance company is also important.  "Permites" generally need to try much harder to sell what they believe in.  Permanent Life Insurance (Universal Life Insurance and Whole Life Insurance) is generally much more expensive since, after all, it is designed to last forever. 

So why do I say we fall responsibly into the term life insurance camp?  Several reasons... Term Life is cheap.  You can purchase alot of coverage for a small amount of money.  Dave Ramsey, Suse Orman and countless other financial gurus recommend Term Life Insurance for these primary reasons.  The logic is that you won't need coverage forever-- so buy while you need it and be done with it when you don't. 

Whole Life Insurance advocates generally say they offer several additional benefits with their product of choice.  An investment component and permanent coverage to name a couple. 

Truth be told... the investment component of a permanent life insurance plan is usually lousy. You can do better on your own.  The permanent nature of a Universal Life Insurance policy or a Whole Life Insurance policy can be important to some individuals however.  For this reason, and this reason alone, we recognize that permanent plans often have a place in your portfolio.  But beware the agent that tries to sell permanent coverage and permanent coverage only-- they're out there.  This solution doesn't suit everyone... but we'll dig into that in a future article. 

For now, we want to focus on the product that has made it increasingly difficult for agents to sell permanent life insurance policies.  Enter... Return of Premium Term Life Insurance.  Return of Premium Term Life Insurance is a term life insurance product, generally offered in 15, 20, and 30 year term lengths.  For a 30 year Return of Premium term life plan at age 25... you'll spend slightly more than an ordinary term life insurance plan. (Depending of course on the face amount- death benefit- chosen.)  At the end of your term... if the policy is still in force and you're still alive... you'll get every penny you ever paid returned to you.  You get back exactly what you put in... There are no loads on different modal premiums either. In other words, you won't pay higher premiums to pay on a monthly, quarterly, or semi-annual basis.  It's almost like getting your life insurance for free. 

The real impact of this product is most significant when you consider the biggest reason consumers didn't like Term life insurance very much in the past... The argument went something like this: "I've paid life insurance premiums all these years and I didn't die and now I get nothing back? That's a rip off!"  For some reason, this same argument has seldom reared up when discussing insuring things less important than a human life-- like Automobiles and Homes for example.  But nonetheless, it has been a common objection to term life insurance.

So Return of Premium Term Life Insurance provides multiple benefits to the insurance consumer.  It's inexpensive compared to most permanent plans, it will give all of your money back, and it can be converted to something permanent without proof of insurability in most cases.

In general, Return of Premium makes the most sense when you're between the ages of 20 and 40, you're looking for at least 30 years of coverage and you don't need a very large face amount.  If these conditions are right, the cost difference between a Return of Premium plan and an ordinary term plan isn't very great and a good case can be made for spending the extra money to get your premium back later in life.

The popularity of Return of Premium life insurance is justified a good deal of the time.  The Permites have met their match it seems.  But a responsible agent will tell you... it's not always what it's cracked up to be either.  Only a discussion about your unique situation will uncover whether or not it suits you. 

Here are some companies that offer Return of Premium Life Insurance.  Most, if not all, of these companies can be found and quoted on this web site.  This site: www.insuringforlife.com offers Return of Premium Term Life coverage from American General... one of a handful of carriers that can tout an A++ rating from A.M. Best. 
 

AIG American General	First Colony	Genworth Life Insurance	Chesapeake Life
Old Mutual Financial (Fidelty & Guaranty)	The Cincinnati Life Insurance Co.	Lincoln National Life	United of Omaha
Peoples Benefit Life Insurance	Western Reserve	Life Investors Insurance Company	US Life (NY only)

This is by no means an all inclusive list... Other companies are trying to meet the rising demand for the Return of Premium product but sometimes the approval process by state insurance departments can be a bit slow. 

As always, the decision is up to you as to whether or not this type of life insurance suits your need and budget.  But a little education goes a long way and we hope we've given something to good to go on in your quest. 

Questions or comments about this article? Drop us a line: info(at)lifeinsdirectory.com