Client Can't Afford Pre-Need Policy

[Newby]

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.

Yes. When you think about the math, if you KNEW someone was going to die EARLY in the policy years, the FE policy would always be the better choice. The exception to that is if they were unhealthy and died in months 13-24 the Preneed would have covered them GI for 70% so that would always be better than 2 year ROP.

But if you KNEW someone was going to live for MANY years, the Preneed would always be the better choice because the FE loses buying power due to inflation and lifetime pay FE is never paid up. So the longer they live, the more they lose because the premiums never stop.

People who buy Preneed will ALWAYS come out ahead as long as they pay off by the end of the same as cash conversion period. That's what most of them do.

If they pay out over the full term, the longer term they pay, the more likely they will pay out more than they recieve. So 10 years is least favorable, 5 years is much better and 3 years is best (of these options.)

If they want to come out ahead on FE, it's usually better to go 10 year pay than lifetime pay...but most don't do that because people who think that way usually go the Preneed route anyway. FE is attractive to the people who want the lowest monthly premium and never think about paying it off.

So as I have said many times before, Preneed is attractive to people who want to pay their funeral in full quickly (usually more affluent) and FE is most attractive to lifetime pay with lowest premium monthly (less affluent).

They both are the right solution in some situations and the wrong solution in others.

 

[TDFnCali]

Yes. When you think about the math, if you KNEW someone was going to die EARLY in the policy years, the FE policy would always be the better choice. The exception to that is if they were unhealthy and died in months 13-24 the Preneed would have covered them GI for 70% so that would always be better than 2 year ROP.

But if you KNEW someone was going to live for MANY years, the Preneed would always be the better choice because the FE loses buying power due to inflation and lifetime pay FE is never paid up. So the longer they live, the more they lose because the premiums never stop.

People who buy Preneed will ALWAYS come out ahead as long as they pay off by the end of the same as cash conversion period. That's what most of them do.

If they pay out over the full term, the longer term they pay, the more likely they will pay out more than they recieve. So 10 years is least favorable, 5 years is much better and 3 years is best (of these options.)

If they want to come out ahead on FE, it's usually better to go 10 year pay than lifetime pay...but most don't do that because people who think that way usually go the Preneed route anyway. FE is attractive to the people who want the lowest monthly premium and never think about paying it off.

So as I have said many times before, Preneed is attractive to people who want to pay their funeral in full quickly (usually more affluent) and FE is most attractive to lifetime pay with lowest premium monthly (less affluent).

They both are the right solution in some situations and the wrong solution in others.

Thats for the great teachings Newby....u can never stop learning in this biz!

 

[GeminiGroup]

Great job, Newby.........well said.