Decreasing Term?

Newby -

At what point do you think the owners of DT will drop their policy? Is it when that $100,000 policy is only worth $50,000 and they are paying the same as they did for $100,000? Or maybe at $20,000?

And what if they decide at a later point they need the original amount (or more) but have become uninsurable? What then?

DT is a useless product. I don't know any carrier that offer it and even if I did I would never make it available to my clients.

I don't know if there is much market for it but it is certainly a useful product if they have a decreasing need. Their intention SHOULD be to become self-insured throught he years.

I agree that most people will buy level term because the cost savings is not enough with DT. But the concept is not flawed. If they have permanent insurance needs, they should not be buying ANY type of term insurance.
 
Their intention SHOULD be to become self-insured throught he years

Give me an example of someone who could be considered self insured. Describe their circumstances.

In all the years I have been in this business, I have never met anyone who either could or should be self insured. Perhaps you can enlighten me as to what I have overlooked.
 
Give me an example of someone who could be considered self insured. Describe their circumstances.

In all the years I have been in this business, I have never met anyone who either could or should be self insured. Perhaps you can enlighten me as to what I have overlooked.

Actually, I used to fall into this trap. The concept is simple, over the years, you build a higher net worth, to the point where your family is taken care of if you die. After all, isn't that what life insurance is all about?

Then I realized something..... If you have a net worth high enough to provide for the family, you have a net worth high enough to cause some major tax issues when you die. Your life insurance changes roles from being what provides for your family, to being what allows your family to keep what you had, rather than having to pay estate and/or income taxes.

So, when someone is in their 20's or 30's, life insurance is all about protecting their income. When someone is in their 60's and 70's, it potentially becomes more about protecting what they have worked all thier lives for.

Dan
 
Self insured and not needing a ton of life insurance is two seperate matters completely. I run into a lot of two income families (which is the majority of households today) that if one died and the debt could be paid off there isn't really no need for insurance outside of the debt. Take a Nurse that is married to a Contractor, both in or around 70 grand a year, if they have no debt a decent retirement plan building up and college savings for children the need of insurance is at best debt related. As far as Estate Taxes, that just wouldn't be much of a concern unless there is a business with hefty amount of assets or something like a farm.

Now if you have a one income household things can of course change quickly. Yet the DT would likely be one of several insurance policies in effect, such as a specific policy to take care of a certain debt, may that be a house or a business loan, perhaps? What people can't seem to get past in this discussion is that a household can have multiple life insurance policies for differing needs.

Say I run into Mr B that I already have covered for his life including DI and LTCi the whole gambit, that would be nice! He says to me that he is expanding his business and that he is borrowing 1 million and wants the rock bottom price to protect the loan since he doesn't want other insurance money he has specifically earmark to be disturb if something happens. Now this is a prime example of where a DT could be implemented, of course you show him both rates say thru AIG since I'm fairly confident they still have one or two DT I can sell. Yet though I would likely recommend a 5 year term that is GR, just drop the amount at the renewal. I seriously doubt the DT is any cheaper then the 5 year term policy.
 
major tax issues when you die

Under the current tax law, very few will have estate tax issues . . . but income taxes are another issue entirely.

Very few inherited assets get stepped up basis. Most have a carry over basis meaning someone, the heirs, have to pay income taxes.

That means liquidating assets, sometimes at a loss, and shrinking the overall value of the bequest.

There are also some assets that generate income in respect of the decedent. Again, another tax hit.

Estate taxes get the press, but income taxes are for many high net worth families a bigger issue.

Adequate planning, using trusts, etc. can help some, but eventually the tax man cometh.

Life insurance is a LEVERAGED asset that you buy at a discount and pays out (for the most part) tax free dollars. You can buy a $1,000,000 policy (depending on age & health) for 20 - 30 cents on the dollar. That means your $200,000 - $300,000 purchase (over time) results in a $1M asset.

Real estate (and some stock plays) can also be leveraged but you have liquidity & tax issues which have the effect of diminishing the net return post mortem.

Those who claim they do not need life insurance are usually saying they are selfish. If they have no heirs, and they do not wish to be charitable in death, then one can make an argument that they do not need life insurance.

Anyone who does not fit that description is a candidate for life insurance, especially a product that is designed to be in place when they die rather than running out at a pre-determined point in time.
 
Very few inherited assets get stepped up basis.

The only assets that I know of that don't get a step up are annuities and retirement plan assets. What is your understanding?
 
Say I run into Mr B that I already have covered for his life including DI and LTCi the whole gambit, that would be nice! He says to me that he is expanding his business and that he is borrowing 1 million and wants the rock bottom price to protect the loan since he doesn't want other insurance money he has specifically earmark to be disturb if something happens. Now this is a prime example of where a DT could be implemented, of course you show him both rates say thru AIG since I'm fairly confident they still have one or two DT I can sell. Yet though I would likely recommend a 5 year term that is GR, just drop the amount at the renewal. I seriously doubt the DT is any cheaper then the 5 year term policy.


Alright well what are the facts. Lots of people here with theoretical ideas of how DT could be good but lets see some rates from someone who supports it. There are no facts in this discussion. Are you talking about a 1,000,000 DT policy in the example above. Are there DT plans that are fully underwritten or are you going to put 1,000,000 on some type of mortgage or non-med plan which would be about Table D.

As an aside, level term is essentially a decreaing term plan anyway because it gets eaten up by inflation. Even if tied to a mortgage the DT plans blow up anyway. Most homeowners refinance or take out a home equity loan and then they need more coverage and they are older and may or may not be as insurable.

Winter
 
Alright well what are the facts. Lots of people here with theoretical ideas of how DT could be good but lets see some rates from someone who supports it. There are no facts in this discussion. Are you talking about a 1,000,000 DT policy in the example above. Are there DT plans that are fully underwritten or are you going to put 1,000,000 on some type of mortgage or non-med plan which would be about Table D.

As an aside, level term is essentially a decreaing term plan anyway because it gets eaten up by inflation. Even if tied to a mortgage the DT plans blow up anyway. Most homeowners refinance or take out a home equity loan and then they need more coverage and they are older and may or may not be as insurable.

Winter

Who needs facts when we have mud that can be slung! Such as: Are there DT plans that are fully underwritten or are you going to put 1,000,000 on some type of mortgage or non-med plan which would be about Table D. Personally I would suggest a 5 year term in my above example. I don't know where the Non-Med taboo came from? Yet I'm at a lost on how I'm suppose to handle a equity loan that may come in future years, so tell me how would you handle it, that is a decision of refinancing a home in future years that may or may not happen? Maybe you got a crystal ball, if so how much did you pay for it?
 
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