Guaranteed issue and return of premium products are distinct from each other, but both share the common element of offering guarantees in an era when guarantees are what the customer wants.
Chart I lists 3 entirely different return of premium products. Item 1–graded benefit life Insurance–is discussed later. Item 2–minimum death benefit in annuity accumulation products–is very common and has spawned variations such as minimum annuity benefit.
Item 3–eventual cash value if no claims have occurred–is showing up in long-term care products and in term life insurance. It is an expensive “best-of-all-worlds” feature, and can apparently be achieved only by lapse-based pricing (which is controversial).
All 3 types of ROP products have gained increased interest in recent years, as consumers continue to seek out secure options for their financial products. This appetite for guarantees was spawned by economic reverberations from the early 2000s recession and shows no sign of abating.
Not coincidentally, guaranteed issue products are also enjoying resurgent interest. This product category, with its promise to issue coverage to members of a group (and sometimes to individual buyers) is by no means new. But in a world where privacy concerns grow higher by the day and detection of medical problems occurs increasingly early and with greater detail, consumers find the idea of guarantee-to-issue immensely attractive.
(In this discussion, I am taking the liberty of including simplified issue products as well. They do require a minimal amount of underwriting, of course, but the products seem to be quite popular in today’s marketplace as most people can qualify with little problem).
Chart II ranks 5 products in order of severity of mortality experience. Surprisingly, one product–graded benefit life insurance–turns up on both charts.