Client Can't Afford Pre-Need Policy

[RonRoberts]

I have a client that informed me today that approximately 8 months ago they took two policies out with a local funeral home with Homesteaders for $10,000 each. Their total payments for 10 years is around $350.00 per month. They now can't afford it and asked me what should they do. If they cancel now they loose the $2800 they paid in. I told them to call the local funeral home and discuss the matter with them.

I also told them I was not familiar with this type of situation, not sure how the funeral home would respond, and would get back with them on Monday. I also would love the opportunity to sell them additional insurance if they canceled their funeral policies but only if they would be in a better position (I believe they would be). He is 72 and her 70 and both are in excellent health. She could probably go preferred with a GUL for a lot more coverage for a whole lot less premium. He on the other hand had a stint placed 6 years ago and according to Midland he would be table rated so would not be able to get the preferred rate with a GUL. Going FE Foresters would be the preferred choice.

Does anyone know how the funeral home is going to do to try to save the policies except tell them how great the benefit is of only paying for 10 years, possibly having an inflationary protection (which I could not find in the policy) and maybe even telling them their services are locked in at the $11000 price (could not find this anywhere either).

Lastly, these are very nice people and only want to do what is best for them. Any advice would be greatly appreciated.

Thanks,

Ron

 

[Rearden]

Tell them to do the math.

$350 x 12 months = $4,200.00

$4,200.00 x 10 years - $42,000.00.

2 Funerals @ $11,000.00 each = $22,000.00 Value.

Ask them if how it feels to be taken advantage of. Ask them if they would like to pay $22,000.00 for a car that retails for $11,000.00.

Tell them, yes, you'll lose out on what you paid in. BUT -- after doing the math -- demonstrate JUST HOW MUCH they'll be saving.

And it sounds like you can save them the same amount they've wasted already EACH AND EVERY YEAR they have this policy. Which they can put away in the bank, spend on a nice vacation, etc.

Should be a nice deal for you if you can break it down for them. Make sure you write the numbers down per month, per year, and then in totality, so they can see it for themselves.

Also, if you sense a modicum of reluctance or disbelief, address the "change" objection head on. Sometimes people are in disbelief of saving so much money for virtually the same benefit.

Good luck -- check back in when you close the deal.

 

[RonRoberts]

Tell them to do the math.

$350 x 12 months = $4,200.00

$4,200.00 x 10 years - $42,000.00.

2 Funerals @ $11,000.00 each = $22,000.00 Value.

Ask them if how it feels to be taken advantage of. Ask them if they would like to pay $22,000.00 for a car that retails for $11,000.00.

Tell them, yes, you'll lose out on what you paid in. BUT -- after doing the math -- demonstrate JUST HOW MUCH they'll be saving.

And it sounds like you can save them the same amount they've wasted already EACH AND EVERY YEAR they have this policy. Which they can put away in the bank, spend on a nice vacation, etc.

Should be a nice deal for you if you can break it down for them. Make sure you write the numbers down per month, per year, and then in totality, so they can see it for themselves.

Also, if you sense a modicum of reluctance or disbelief, address the "change" objection head on. Sometimes people are in disbelief of saving so much money for virtually the same benefit.

Good luck -- check back in when you close the deal.

I went through this scenario with them just to show them the math. They have the funeral home agent coming out to their home on Tuesday because the agent says she can save them money. After doing the math and sitting with them for a couple of hours they truly believe that the funeral home will come down on their policy and if this happens I am all for it, but like I told them I don't believe that is going to happen.

It would be a really nice deal if it swings my way but I have learned don't get your hopes up in this business.

 

[jdeasy]

The funeral is is not going to refund any money. They will offer them a reduced paid up plan in the amount of whatever they have paid will buy. At least, that's the most likely way it will play out.

As for the GUL for the wife, that is always an option, but it's an option that I would never do. I will not sell anything for funeral purposes except whole life. But, that's personal preference.

I am a believer in preneed plans only if the person can pay for it upfront. Once it is dertermined that they would have make payments I don't believe in them. Again, personal preference and belief. I mean I think they are a good deal if you can pay for it upfront. Still not convinced it's a good idea to tie your money up with a funeral home. I could pay for mine upfront and I haven't. I would rather I have use of my money than the funeral home. Problably explains why I don't sell preneed.

 

[Newby]

Yes they are going about preplanning in he worst possible way. They should NEVER pay the preplan out 10 years unless they are terminally ill (and won't likely live more than a year or two.)

Homesteaders Life offers a conversion to same as cash during the 1st 12 months plus a $300 conversion fee. They need to check with the funeral home about downgrading the preplan from an entire funeral to just a casket or a vault or something that costs a little more than what they have paid in. Once that is completed (usually takes around 2 weeks to get a confirmation) they need to pay off the entire balance.

Then they can buy a final expense policy that fits their budget.

I'm assuming that they are not wealthy enough to pay off the entire funerals by the 12th month. If they could do hat it may be the most attractive option to them.

And even if they don't give them any downgrade options, tell them to NOT pay minimum payments for 10 years. They have all kinds of early payoff opportunities with Homesteaders. They need to knuckle down and pay lots of extra in every year and pay it off as quickly as possible. It will save them thousands of dollars.

 

[sellingdog]

Yes they are going about preplanning in he worst possible way. They should NEVER pay the preplan out 10 years unless they are terminally ill (and won't likely live more than a year or two.)

Homesteaders Life offers a conversion to same as cash during the 1st 12 months plus a $300 conversion fee. They need to check with the funeral home about downgrading the preplan from an entire funeral to just a casket or a vault or something that costs a little more than what they have paid in. Once that is completed (usually takes around 2 weeks to get a confirmation) they need to pay off the entire balance.

Then they can buy a final expense policy that fits their budget.

I'm assuming that they are not wealthy enough to pay off the entire funerals by the 12th month. If they could do hat it may be the most attractive option to them.

And even if they don't give them any downgrade options, tell them to NOT pay minimum payments for 10 years. They have all kinds of early payoff opportunities with Homesteaders. They need to knuckle down and pay lots of extra in every year and pay it off as quickly as possible. It will save them thousands of dollars.

Newby, if a potential client can't ( or does not want to) pay off a preneed plan immediately, what is the maxium you would go with Homesteaders etc. As an F.E. agent I want to educate those people I sit with on what their best option is.

Thanks in advance, Happy Easter.

SD

 

[Newby]

I don't understand your question.

Preneed is a good option under certain circumstances. They are:

1. You can pay it off as a single payment
2. You can pay it off during the same as cash payoff terms (can be 12th month, 24th month or 36th month depending on the company)
3. You are terminally Ill and unlikely to live very many years (in that case take the longest payment term offered)
4. You are paying it out 3 or 5 years and the total of premiums make sense compared to what the funeral would likely cost when you die. ( example: you are 50 now and paying on a $9,000 funeral. Your total of payments is $14,000. You are expected to live 30 years. This would be OK because 30 years of inflation on a $9,000 item would be expected to make it cost $25,000 to $30,000 when you are age 80. And you could live even longer.

The worst way to pay a Preneed plan is to pay it out for the full 10 years. Especially if you are an older age (higher premium) when you start it. Preneed premiums should be looked at the same way you look at a car loan. Pay it over as short of time as you can afford. Take advantage of same as cash payoff options. Never pay longer than 60 months.

 

[GeminiGroup]

The funeral is is not going to refund any money. They will offer them a reduced paid up plan in the amount of whatever they have paid will buy. At least, that's the most likely way it will play out.

As for the GUL for the wife, that is always an option, but it's an option that I would never do. I will not sell anything for funeral purposes except whole life. But, that's personal preference.

I am a believer in preneed plans only if the person can pay for it upfront. Once it is dertermined that they would have make payments I don't believe in them. Again, personal preference and belief. I mean I think they are a good deal if you can pay for it upfront. Still not convinced it's a good idea to tie your money up with a funeral home. I could pay for mine upfront and I haven't. I would rather I have use of my money than the funeral home. Problably explains why I don't sell preneed.

Could you enlighten as to WHY?
I've got no dog in the fight, I'm just curious as to your reasoning and I'd like to hear how and why a person with experience, in this arena, came to feel strongly one way vs another.

Thx JD and anybody else that has a take.

 

[Newby]

Several reasons.

If someone had paid 7 months of premiums on your final expense insurance and said I just can't afford it now. I would like all my money back please. Could you give it to them?

It's the same way with Preneed insurance. They were insured for the 7 months. If they would have died the death benefit would have been paid out. The commissions have been paid out. It's no different than the FE policy as far as a refund goes.

 

[sellingdog]

Thanks Newby, that was very helpful. So the key for those who can pay it off is that it covers the inflation factor, which I really had not thought about.