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I am curious what inflation rate you guys use to figure how much coverage someone needs with a "Final Expense" policy.
I have always sold the policies with inflation protection built into the policy and have just started offering the level-benefit policies.
Say for example you sell a healthy 65 year old woman a policy and she wants it for funeral and cemetery expenses which she estimates to be $10,000 at today's prices. What amount do you recommend for her?
If you look at 25-year spans of time starting in 1950, the lowest average inflation rate was 3.5% during 1981-2005 based on the consumer price index. If you use longer time spans it gets worse (4.4% for 30-years and over.)
If you figure 3.5% average inflation here is what she needs at various ages:
Age 75 she needs $14,105
Age 85 she needs $19,897
Age 95 she needs $28,067
Age 100 she needs $33,335
How do you ethically and realistically go about advising her how much insurance she needs for final expenses? Too little coverage and you did not do her family a good service. Too much and she can not afford.
The ads on TV and magazines always go for $10,000 or $15,000 policies but it seems like they are really just going for a quick and easy sale rather than doing any kind of service for their clients.
It seems to me like the final expense companies should offer the inflation protection as an option on their policies (just like most LTC policies do.) It would make it affordable for people to realistically have the coverage they need rather than a wild guess. Are there any insurance companies out there offering such a product other than the pre-need funeral insurance companies?
I have always sold the policies with inflation protection built into the policy and have just started offering the level-benefit policies.
Say for example you sell a healthy 65 year old woman a policy and she wants it for funeral and cemetery expenses which she estimates to be $10,000 at today's prices. What amount do you recommend for her?
If you look at 25-year spans of time starting in 1950, the lowest average inflation rate was 3.5% during 1981-2005 based on the consumer price index. If you use longer time spans it gets worse (4.4% for 30-years and over.)
If you figure 3.5% average inflation here is what she needs at various ages:
Age 75 she needs $14,105
Age 85 she needs $19,897
Age 95 she needs $28,067
Age 100 she needs $33,335
How do you ethically and realistically go about advising her how much insurance she needs for final expenses? Too little coverage and you did not do her family a good service. Too much and she can not afford.
The ads on TV and magazines always go for $10,000 or $15,000 policies but it seems like they are really just going for a quick and easy sale rather than doing any kind of service for their clients.
It seems to me like the final expense companies should offer the inflation protection as an option on their policies (just like most LTC policies do.) It would make it affordable for people to realistically have the coverage they need rather than a wild guess. Are there any insurance companies out there offering such a product other than the pre-need funeral insurance companies?