What's an ROP term life policy? Is it more expensive and better than the usual TL policies?
Total Comments: 13
Posted: Fri Dec 11, 2009 04:44 pm Post Subject:
Even putting the premium difference in a savings account at most commercial banks at 0.50-0.75% interest will do better than any 20-year ROP policy during at least the first 10-15 years. Using the money to fund one's Roth IRA and getting just a 5% return will be far superior.
The only "catch" in either case: dying too soon. You can plan on putting the money into savings, and even do so, but dying anytime soon wipes out the intended savings that have not had time to accumulate, let alone compound. But at least the beneficiary will get both the death benefit + the savings (assuming they are heir to the savings). Essentially the same as ROP.
Posted: Sat Dec 12, 2009 03:03 pm Post Subject:
So buy regular term and "invest" the difference now?
What if my regular term premium is 35 bucks, at double the cost that leaves me with $35 pre month to invest. Where am I going to invest 35 bucks a month? Most mutual funds won't let me open an account until I've got $1,000 to deposit.
I'm not waiving the banner for ROP, I think it's an absolute waste of money. But you can't split the difference on these tiny numbers and invest them most of the time.
Posted: Mon Dec 14, 2009 08:08 am Post Subject:
Many mutual funds will take a new account with a minimum monthly commitment of $25 by ACH from checking or savings.
Having said that, I agree that $25 or $35 per month over twenty years is not going to make anyone independently wealthy or even keep up with inflation. But even in a shoe box or under the mattress (0% interest), that would still amount to $8400 in 20 years.
A student showed me her ROP term policy five or six years ago -- I have a copy of it somewhere. Age 26 at issue, 20 year term, $25,000 face (yes, I know). $12/month premium ($120 annual), PLUS $16/month for the ROP rider. Absolutely insane.
The insurers could easily do ROP at no cost, or a nominal $5 per month. No need for 35-100% (or more) on top of base premium. As you say, "an absolute waste of money."
Posted: Fri Dec 11, 2009 04:44 pm Post Subject:
Even putting the premium difference in a savings account at most commercial banks at 0.50-0.75% interest will do better than any 20-year ROP policy during at least the first 10-15 years. Using the money to fund one's Roth IRA and getting just a 5% return will be far superior.
The only "catch" in either case: dying too soon. You can plan on putting the money into savings, and even do so, but dying anytime soon wipes out the intended savings that have not had time to accumulate, let alone compound. But at least the beneficiary will get both the death benefit + the savings (assuming they are heir to the savings). Essentially the same as ROP.
Posted: Sat Dec 12, 2009 03:03 pm Post Subject:
So buy regular term and "invest" the difference now?
What if my regular term premium is 35 bucks, at double the cost that leaves me with $35 pre month to invest. Where am I going to invest 35 bucks a month? Most mutual funds won't let me open an account until I've got $1,000 to deposit.
I'm not waiving the banner for ROP, I think it's an absolute waste of money. But you can't split the difference on these tiny numbers and invest them most of the time.
Posted: Mon Dec 14, 2009 08:08 am Post Subject:
Many mutual funds will take a new account with a minimum monthly commitment of $25 by ACH from checking or savings.
Having said that, I agree that $25 or $35 per month over twenty years is not going to make anyone independently wealthy or even keep up with inflation. But even in a shoe box or under the mattress (0% interest), that would still amount to $8400 in 20 years.
A student showed me her ROP term policy five or six years ago -- I have a copy of it somewhere. Age 26 at issue, 20 year term, $25,000 face (yes, I know). $12/month premium ($120 annual), PLUS $16/month for the ROP rider. Absolutely insane.
The insurers could easily do ROP at no cost, or a nominal $5 per month. No need for 35-100% (or more) on top of base premium. As you say, "an absolute waste of money."
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