Return of premium term: when it's a fair deal and when it's a bad one

Return of premium (ROP) term is easy to sell because the pitch writes itself: outlive the policy and get every dollar back. It's also one of the products most likely to be dropped in year 7, which is exactly when it becomes a bad deal.

How it prices. ROP runs anywhere from 50 to 150 percent more than plain level term for the same face and term. The extra premium is what funds the refund. If the client keeps the policy to the end of the term, they get the full premiums back with no interest. If they lapse early, the refund schedule is a fraction and in the early years it's zero.

Who it fits. A healthy 30-to-40-year-old with stable income, a real 20- or 30-year need, and a track record of keeping commitments. The refund is a forced savings account with no return, which some people genuinely prefer to a savings account they'll raid.

Who it doesn't fit. Anyone with variable income, anyone who is buying the minimum they can afford, and anyone who might move or refinance and reconsider. The math only works at the finish line.

The honest comparison to show. Level term premium versus ROP premium, side by side, and the difference invested at a modest rate for the term. In most cases the invested difference beats the refund. Show it anyway. Some clients will pick ROP because they know they won't invest the difference, and that's a legitimate choice once they see the numbers.

Compliance note. Never describe ROP as "free insurance." It isn't, and the phrase shows up in complaint files.

How many of your ROP sales are still in force past year 10?