A case for ROP Term

[Travis Price]

Apparently you have forgotten Black Monday in October 1987 when the market dropped 22% in one day after having lost over 10% the previous week.. Had a friend that was getting ready to retire and it gutted his retirement accounts.. It took several years for the market to recoup the loss.. And, speaking of the Black Friday 1929 crash, it took 25 years to regain the losses.. That is a long time to wait to retire..

Eh.. retirement was never part of this discussion.. but okay.

Dude has a market value of around 121k by investing his premiums overage (1200 annually over 30 years w/ 7% growth rate.) Let's say your massive correction happens and it's 30%. He has a market share of around 85k. That's still more than the RoP cash and it's only 40k off from paid off.

His growth goes to 7% average for the next 15 years. His amount at 77, when he dies is 234,517.68. His family cashes out in CA and they have the highest fed tax rate..

160-ish is still more than the 127k he gets from life insurance.

So, in the absolute worst outcome in history, he'd still be ahead.

Guy likes guarantee's, no complaints here... However, there are some people that are trying to change the debate to be right here... It just doesn't work out when you put it in the parameters of the discussion being had.

 

[Tahoe Ray]

And I appreciate it.

I do not have tons of the United Home ROP inforce but I do not believe I have ever had one replaced.

Out of curiosity, Lee, why are these clients not going to Cincy?

 

[WinoBlues]

Out of curiosity, Lee, why are these clients not going to Cincy?

The United Home one? Cinci would have been T2-T4 probably closer to T4. They're a little conservative underwriting wise. Also, like others, they no longer offer RPU option.

If the 32 yr old and his dad, they are Cinci. Older plans. His wife = I do not recall how AAA beat me. I think I have their illustrations in the file.

 

[shonceman]

Not sure the last time I saw a GUL lose its guarantees. I remember having that discussion with JD when I first got here. Seemed like every FE guy was saying the same thing. I have clients that have missed several premiums, lowered the face to lower premiums and keep their guarantees. With Protective, Ohio National and Sagicor to name a few.

Since you said that, I went and looked at the GUL from AIG/American General, who I often use for larger non-FE cases. The contractual language makes it clear that a missed payment would void the guarantee. If similar language is in the contract you sold her, I would raise it as a concern, even though current company practice allows for some mercy. It’s kind of like some FE carriers who, in reality, don’t lapse a policy until after 60 days even though the contractually stated grace period is 30 or 31 days. Just because they wait 60 days currently doesn’t mean they can’t or won’t shorten that in the future.

Not GUL

I understand that. But that’s what the clients thought they had. So when somebody tells me their UL is guaranteed not to lapse or increase premium, I’m still going to try to see it. If it’s really guaranteed, I will tell them so and leave it alone.

40% lower premium than the old FE, the GUL and the Term would buy her just enough FE Whole Life insurance to bury her so shallow a puppy could dig her up.

I wouldn’t be suggesting that she replace older in-force policies. I also probably wouldn't try to switch her to WL from the ROP term. But if I get the impression that the new policy is a stretch for her at $153/month, I might show her what $80-100 would buy in a similar policy. (But then I’d probably just tell her to call you to see about reducing the face.)

Heey! Being that she lives in Oakland she has been approached many times by FE guys.

Asking for referrals from somebody who just rejected me is a shot in the dark! But I meet so many people who have perfectly good coverage, who have just forgotten what they have, and can’t reach their agent. When I go over their program, find that it’s sound, and educate them without going for a sale, they sometimes appreciate that enough to give me a referral or two.

 

[WinoBlues]

Thanks, it has been a long time since I have had to defend against replacement I, am getting soft.

GUL - agreed that each company is different. Also agree that spreading doubt is a way to get someone curious.

I can not speak for AIG. I did just get an inforce from Sagicor that shows the death benefit guaranteed to age 120, maybe 100, for a client that has missed several payments in the past. We ran it when I qot a pending lapse notice. I honestly thought I had a reason to sell her a new policy. But not yet.

On Wednesday I was doing what you were saying to a Farmers agent. Farmers VUL was blowing up. Paying minimum premium of $50mo. Now the solution is costing him $130mo for a smaller SNL SIWL. But I still wrote the daughter a GUL and the grandkids WL. But addressing the wife's doubts was tough. She was pissed and leary. I enjoyed being on the offensive much more than being on the defensive.

I rarely compete with another agent anylonger. I used to get off on the battles. Now I am glad I live in my little safe bubble and don't run into all you FE guys often.

Oh, and the Travis' those young guys can just wait this old guy out.

 

[Allen Trent]

It’s kind of like some FE carriers who, in reality, don’t lapse a policy until after 60 days even though the contractually stated grace period is 30 or 31 days. Just because they wait 60 days currently doesn’t mean they can’t or won’t shorten that in the future.

with those carriers you mention that have an extended payment period to avoid the policy needing to be reinstated, do they actually have coverage from day 31-60? many policies & notices I see clearly say on the notice that they have not paid during the grace period & have no coverage, but if they pay by X (60th day) they can continue the coverage without full UW reinstatement.

if they die in days 31-60, claim not paid

I have seen clients that pay Quarterly get used to this & end up paying for 12 months of coverage but really only being covered for 8 of the 12 months if they die.

 

[shonceman]

with those carriers you mention that have an extended payment period to avoid the policy needing to be reinstated, do they actually have coverage from day 31-60? many policies & notices I see clearly say on the notice that they have not paid during the grace period & have no coverage, but if they pay by X (60th day) they can continue the coverage without full UW reinstatement.

if they die in days 31-60, claim not paid

I have seen clients that pay Quarterly get used to this & end up paying for 12 months of coverage but really only being covered for 8 of the 12 months if they die.

The FE companies I know of will pay the claim as long as they (the company) have not actually lapsed the policy yet. But since the contract says 30 days, it’s still a possibility for them to deny a claim outside the stated grace period, so I try to warn my lagging payers not to take that chance.

 

[WinoBlues]

@shonceman

I did just get an inforce from Sagicor that shows the death benefit guaranteed to age 120, maybe 100, for a client that has missed several payments in the past. We ran it when I qot a pending lapse notice.

Found it. The policy was lapse pending. About 60 behind. She did not pay the catch-up premium. She has missed a couple of monthly premiums before as well. She had and has $0 cash surrender value.

You are correct in that she did lose the lifetime guarantee. Only to age 101 now. Not sure if she paid the Catch-up if that would restore the Lifetime guarantee. Her original premium was $51.16mo @ age 40.

 

[shonceman]

@shonceman




Found it. The policy was lapse pending. About 60 behind. She did not pay the catch-up premium. She has missed a couple of monthly premiums before as well. She had and has $0 cash surrender value.

You are correct in that she did lose the lifetime guarantee. Only to age 101 now. Not sure if she paid the Catch-up if that would restore the Lifetime guarantee. Her original premium was $51.16mo @ age 40.

101 is still a good guarantee. (Unless she gets to be 102). Better than losing the guarantees altogether!

 

[Life Hawk]

One additional piece - the wife bought a Million dollar 30yr ROPterm from AAA. He bought a ROPterm for his father and has referred a couple friends to me for the same.

That! It's in the family and it's in his brain. Amazing! He's self sold at this point, you just need to help him connect the dots.