Using annuities as a legacy tool: The ROP feature

Recently, Bandhan Life announced iRetire, a life annuity with a return of purchase price (ROP) feature that ensures lifetime income for the annuitant. Upon a policyowner's passing, the original investment will be returned to their nominee or legal heir.

This type of product addresses the desire of those customers who want to provide their heirs with a financial legacy.

"By extending the use of an annuity for both accumulation and income, customers have the potential to maintain a portion of their principal over time, without depleting their initial premium. Eventually, their assets can become part of an inheritance,” said Dave Byrnes, Head of Distribution at Security Benefit.

For those who prioritize accumulation, income, and legacy potential without the risk of loss, ROP annuities can be a game changer, especially when they’re clearly promoted and explained by knowledgeable advisors.

How agents can convey the value of ROP annuities

The Life Annuity with Return of Purchase Price (ROP) structure offers a balance between guaranteed income and capital preservation, particularly for clients concerned about leaving a legacy or protecting a surviving spouse.

While the income payout is slightly lower than a standard life-only annuity, agents can explain that the trade-off may be worthwhile. The return of principal mitigates the psychological hurdle of “losing” their investment if they don’t live as long as they thought they would

“For individuals evaluating long-term care alternatives or healthier spouses who worry about outliving household assets, this feature can serve as a creative planning tool that blends income stability with estate continuity,” explained Brian Kaplan, certified financial planner at Lenox Advisors.

Since many customers may not be familiar with ROP annuities, it’s ultimately up to agents and carriers to educate consumers who may benefit from them.

The future of ROP annuities

These days, more customers are prioritizing security and flexibility. As a result, there will likely be a broader adoption of ROP-style products in the near future. “I anticipate that more insurance carriers will follow Bandhan Life and introduce similar offerings,” said Kaplan.

In a volatile world where predictable income, stability, and control are important, carriers are seeking to provide these types of products.

Manuel Rodriguez Vera, Business Unit Head of Insurance at WNS, part of Capgemini, pointed out that the long-term growth of hybrid annuity products will not be driven by actuarial or customer appetite alone.

“It hinges on an insurer’s operational and digital agility. Modern technology platforms, powered by advanced analytics and AI, are vital for achieving product velocity. They enable carriers to efficiently model, price, and administer complex product variations like ROP annuities without massive operational overhaul,” explained Vera.

These systems essentially allow the insurer to segment the market and personalize the value story. When this happens, complex trade-offs, such as reduced income rates versus the secured principal, translate into simple and actionable advice for the end-customer.

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Anna Baluch is a finance reporter and writer with more than a decade of experience. Contact her at anna.baluch@innfeedback.com