Total term premiums collected increased from 2005 to 2006, according to the 2006 U.S. Individual Life Insurance Sales report from LIMRA International, Windsor, Conn.
How can this be, considering that overall term rates continue to decrease each year and term sales have been relatively flat? Did traditional term really sell that much more to get that premium?
The answer is return of premium (ROP) term life insurance.
Everyone has heard of ROP, but now more companies are seeing it as a requirement to stay competitive in the term market.
ROP has a higher premium associated with it compared to traditional term products, but its increasing popularity is certainly a reason for the rise in total term premium collected.
Most companies that have an ROP rider sell it on at least 15% of their term policies. Some companies that market the rider heavily sell it on more than 50% of their term policies.
So, having ROP keeps a company and a producer even with the competition. Given the market today, not having it is probably a disadvantage.
Why are some companies not selling it? Some are concerned that ROP term will reduce their current sales of universal life or whole life products.
However, more companies are becoming comfortable with the ROP rider than in previous years. Within the last 3 years, for instance, we have noticed that the number of insurers offering ROP term has more than tripled.
For the selling agent, ROP offers an easy sales pitch: “Get a money-back guarantee with your life insurance if you survive to the end of the level premium periods.
“Not only do you obtain death benefit protection, but you also get the flexibility of converting the policy to a permanent product, and the added bonus of cash value availability.
“If you decide you do not want the policy, then you get some or all of your money back, depending on how long you kept the policy in force.”