By:  Eric Ruh
“Buy term and invest the difference.” “Paying for term insurance is like throwing your money out the window.” ”Whole life insurance is a great ‘investment’” “Whole life insurance is like throwing your money down a hole.”
How many of these statements have you heard, believed, or misunderstood? This article is not meant to uncover all of the mysteries of life insurance, but to explain one option that truly may “bridge the gap” between all types of coverage, Return of Premium (ROP) Term. 
ROP is a product that is a bit more expensive than regular term insurance, yet is much less expensive than whole life insurance, and serves the same purpose. If you die prematurely during the insurance period, your family receives a death benefit. The kicker though (just like the name implies) is if you do not die during the insurance period, the owner of the contract will receive their entire premium back. These products typically range from 15 to 30 years of coverage.
Let’s take a look at what the numbers look like for a 35 year old male purchasing a $250,000 life insurance contract. Please note that the following figures are for illustrative purposes only.
Scenario one:  Buy a 20 year basic term contract. Premium is $207 per year or $4,140 over the full term. If the insured does not die, no money is returned.
Scenario two:  Buy a 20 year ROP term contract. Premium is $761 per year or $15,220 over the full term. If the insured does not die, the insured gets back the entire $15,220.
Is the return of premium worth the additional $554 per year? If you invested $554 per year for 20 years, you would have to earn approximately 3.2% annualized after tax to grow your investment to $15,220. For comparison, 10-Year U.S. Treasury bonds are yielding 2.59% as of November 9, 2010.
So, what is the right product for you: basic term, whole life, or return of premium term?  Is there something in the middle that fits your situation? The answer is it depends. It depends upon your goals, time horizon, strategy, current assets, economic outlook, income range, and what you really want your life insurance coverage to do for you. These questions should be asked and answered with a licensed professional before you take the plunge and purchase your first or additional coverage.

Eric Ruh is an independent insurance representative at CPS Horizon Financial Group in Hales Corners, WI. His practice includes Life, Disability, Long Term Care, Indexed Annuities, and Linked Benefits. He can be reached at 414-427-8660 or 

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