Live Long and Prosper
New life insurance policies offer refunds.
One of the hottest life insurance products on the market right
now is Return of Premium (ROP). If you insure your key employees or
buy-sell agreements, you might want to consider this option.
ROP is an attractive alternative to traditional forms of life
insurance, says Byron Udell, president and CEO of AccuQuote.com, a
life insurance brokerage firm in Wheeling, Illinois. Historically,
you could choose from two types of life insurance: term, which does
not build cash value; and permanent, which includes a variety of
products that develop some cash value. Premiums on permanent
insurance can range from five to 10 times the premiums on term.
By contrast, ROP premiums are generally about one-third higher
than term, and if the covered individual doesn't die before the
end of the policy, the full amount of the premiums paid is
refunded. In most cases, the refund is without interest.
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"Normally, for businesses, covering a risk with insurance
is just an expense," says Udell. "But with ROP, it ends
up being a wash when the term is over. Rather than the money just
bleeding out of the company, you'll get it back at some future
date."
Of course, if you cancel the policy before the contract ends,
your refund will range from nothing to minimal. If you have a
key-man policy on someone who leaves the company, you can maintain
the coverage or allow the individual to take it over until the
contract ends.
Jacquelyn Lynn is a freelance business writer in Orlando,
Florida.