Decreasing Term

[DiegoInsGuy]

I have a prospect who is looking for Decreasing Term here in CA . I don't know anything about decreasing term, and my upline tells me yesterday that it doesn't exist.

So to make a long dtory short this is what I tell my client, and I go ahead and send him over a 30 year level term quote through Transamerica, they weren't the cheapest but they seem to have the best Underwriting to possible get him a preferred or Preferred+ rating wich in essence will be cheaper than a standard or standard+ rating from another carrier.

So I send him the app yesterday and he calls me today to let me now that his bank is going to call him today with some details on Decreasing Term. So does it exist?

The client has a mortgage of 390,000. His budget though is right around $100 bucks monthly. He seems to think that he will get more coverage from decreasing Term than from Level term

So I gave him a quote for 250k Preferred+ at $109 monthly..30 year term he is 53 years old here in CA. Any ideas as to what I should do to get him to want the level term over the decreasing term?

 

[STIBROKER]

does not exist any more.......

 

[BNTRS]

Decreasing term is just the life insurance protection sold on a promissory note that makes the note satisfied upon proof of death of the insured. The Bank may be retaining the risk and simply charging him for the feature on his mortgage, or (more likely) may be using an insurance company somewhere to retain the risk and issue a policy.

Decreasing term is rare among agents, but common among people who deal in lending instruments. The underwriting (if any) is generally pretty lax. Banks and F&I offices at Car Dealerships are all over it because there's money to be made in selling it.

Here' what happens if he buys decreasing term:

Hey pays the same premium for the duration of the term (usually set to match the length of the debt obligation) and the actual insurance amount decreases on a schedule that matches the principal balance of the loan (hence decreasing term). Meaning the insurance become more expensive each month for him.

Level term would not decrease. Meaning regardless of the outstanding balance, he's going to receive the same death benefit.

It's probably obvious, but I'll point out that level term often is the better deal, and this is why decreasing term is so rare among agents (it's generally a bad deal).

Still, the thing decreasing term has going for it, is it's simpler underwriting, meaning they can make his problem go away faster and more easily. If that's all that matters to him, you're dead in the water.

 

[WinoBlues]

Counter it with a self directed "decreasing term". With a term or term like product.

 

[DiegoInsGuy]

Can you expound on this please..Not quite sure how I can counter it or which company to use for that purpose..?

 

[WinoBlues]

Can you expound on this please..Not quite sure how I can counter it or which company to use for that purpose..?

One of the companies I run orphans for had a lot of these on the books. Some have cash values or dividends. They still wrote them until a few years ago.

Decreasing term is going to look a couple different ways. It is going to be linear, a straight line down from $250,000 to 0 at the end of the 30 years. Or it is going to be curved, slightly down hill curve in the early years and a sharper drop in the latter years. If I was sitting in front of the client I would draw a simple graph.

One way to self direct the decrease is with a term policy that you can simply request decreases in the face amount every X amount of years. The client controls when, and more importantly _if_ this happens. I have not tried but you may be able to illustrate this with a termUL software. Ask him if he wants to have control of the decrease or have the company control it. Caution: Watch the guarantees.

Do not make it to complicated. Just show him you have an equal or better plan and ink it. The reality is he most likely will never decrease it.

 

[DiegoInsGuy]

Thanks for the help.

Decreasing term is just the life insurance protection sold on a promissory note that makes the note satisfied upon proof of death of the insured. The Bank may be retaining the risk and simply charging him for the feature on his mortgage, or (more likely) may be using an insurance company somewhere to retain the risk and issue a policy.

Decreasing term is rare among agents, but common among people who deal in lending instruments. The underwriting (if any) is generally pretty lax. Banks and F&I offices at Car Dealerships are all over it because there's money to be made in selling it.

Here' what happens if he buys decreasing term:

Hey pays the same premium for the duration of the term (usually set to match the length of the debt obligation) and the actual insurance amount decreases on a schedule that matches the principal balance of the loan (hence decreasing term). Meaning the insurance become more expensive each month for him.

Level term would not decrease. Meaning regardless of the outstanding balance, he's going to receive the same death benefit.

It's probably obvious, but I'll point out that level term often is the better deal, and this is why decreasing term is so rare among agents (it's generally a bad deal).

Still, the thing decreasing term has going for it, is it's simpler underwriting, meaning they can make his problem go away faster and more easily. If that's all that matters to him, you're dead in the water.

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Thanks this idea has alot of merit. I'll see what I can do..

One of the companies I run orphans for had a lot of these on the books. Some have cash values or dividends. They still wrote them until a few years ago.

Decreasing term is going to look a couple different ways. It is going to be linear, a straight line down from $250,000 to 0 at the end of the 30 years. Or it is going to be curved, slightly down hill curve in the early years and a sharper drop in the latter years. If I was sitting in front of the client I would draw a simple graph.

One way to self direct the decrease is with a term policy that you can simply request decreases in the face amount every X amount of years. The client controls when, and more importantly _if_ this happens. I have not tried but you may be able to illustrate this with a termUL software. Ask him if he wants to have control of the decrease or have the company control it. Caution: Watch the guarantees.

Do not make it to complicated. Just show him you have an equal or better plan and ink it. The reality is he most likely will never decrease it.

 

[Guest]

sell them a REAL and useful life policy

 

[nightmareonelmst]

does not exist any more.......

yet they still ask questions on it on state exams

 

[captain94]

Bankers fidelity life sells a decreasing term