From No IUL experience to almost 20 cases in 30 days. HELP!

[Dins]

A couple of questions:

How did you come up with the face amounts? Especially on the kids. How do these plans look if the kids do not increase the planned premium in the later years?

Did you allocate any additional premium to Dad's policy to accomplish his goals?

I was originally planning to go with a lower face amount, because I didn't see the need for the kids to have so much, but the Dad didn't respond as well to that. He really wanted to keep at least the 150K. Also, once I started building them, I needed a DB that would accommodate the premiums. When I ran lower DB, the premiums were automatically lowered in the later years to prevent a MEC.

I did not allocate any additional premium to Dad's policy. In fact, I was wondering if I should advise him to pay the min into that policy to keep it alive, whilst putting the difference into one of these for better accumulation. Thoughts?

I agree with scagnt83. Your 2nd question is an excellent point. One I probably didn't look into enough. He did ask the question, and I answered that they could pay less if needed, and that they didn't have to start at age 30 if they couldn't. I sold the premium flexibility as a benefit of this plan, but I didn't go into detail on what that looked like. Probably because I didn't want him to get into the mindset that it was okay to stray from the plan and everything still work out. I really wanted him to understand that these could only perform like the illustration, if THEY paid as illustrated. I also harped on him to setting the expectation in the kids(Especially the 19YO) minds now that they are expected to take this over and start contributing to their retirement no later than age 30.

I did just re-run the illustration for the 7yo, assuming he never takes over and all premiums stop with Dad after 15 years. I've attached what that looks like. I think its a pretty good worst case. What do you guys think?

Sorry, Forgot to ask if Waiver of Premium included? These all seem to be very dependent on larger premiums. Disability would change those plans.

None of this is to tear apart plans. We are just asking questions.

Honestly, I didn't even think about WOP. Definitely something I should have, in considering all possible scenarios. You have no idea how much I appreciate your questions and feedback. This is exactly what I wanted! I feel like my IMO didn't ask enough questions when helping me build this. They were more like "Build it however you want. Anything is better than what they have now!".....

 

[scagnt83]

I want to make sure I fully understand the 1st point you are trying to make. Would you use CVAT or not, considering the cons in the later years?

I did compare against the inforce illustrations and mine blew them away.

I think it might be a wash situation really. Run the illustration and see what works best. Id guess the CVAT illustration would start with a lower DB, perform better in early years, and then later years possibly not.

Its just a very large premium increase, which makes it hard to maximize policy performance, since having as low a DB as possible is how to maximize performance.

Just do a GPT max funded policy, level premium so its truly maxed out.

Add a Guaranteed Insurabilty Rider to the Policy. That way, if they can afford more in the future, they can do a maxed out (level premium) policy with no health worries.

Problem solved, in multiple ways since there is the issue of affordability in the future.

 

[scagnt83]

I was originally planning to go with a lower face amount, because I didn't see the need for the kids to have so much, but the Dad didn't respond as well to that. He really wanted to keep at least the 150K. Also, once I started building them, I needed a DB that would accommodate the premiums. When I ran lower DB, the premiums were automatically lowered in the later years to prevent a MEC.

Dont let the client tank the policy performance. They will blame you in future years.

You need to just be firm, tell him "if you want the policy to be SECURE, $75/m will buy you this much coverage" ... "when you are ready to increase premiums, we will exercise the GIO Rider and the DB will be double then".

Its not your job to give them exactly what they want for exactly how much they want to pay. That is a recipe for a lawsuit.

Your job is to tell them how much they can get with what they can currently afford.

 

[Dins]

Thanks for all your help. I'm wondering what your thoughts would be on this case I'm working on right now for a young family.

Husband-24YO, Great Health
Wife-26YO, Good Health, but probably standard based on Height/Weight
Kid1-5YO
Kid2-6months old.

Husband currently has a large 20yr Term and qualified super preferred. Wants 500K of additional coverage.

He wants his and the wife's policy to be for retirement with the goal of 7 figures in each by age 65. Wants the kids polices to be for college contribution and kids to have a head start on retirement.
Budget is $800mo.
My original plan was:

For the husband and wife, set up a 500K increasing IUL through NA @ $200mo each. My illustration shows that if he pays consistently, at age 65 he should have almost 1.3M Non-Guaranteed, and she she have almost 1.2M Non-Guaranteed.

For the older kid, set up 300K increasing IUL through NA @ $200mo.
For younger kid, set up 500K increasing IUL through NA @ $200mo. (My illustration shows that there should be around 100K non-guaranteed at age 22).

I thought this was a great plan, but as I've been searching through these forums looking for more IUL wisdom, I want to run it by you guys to make sure it's really the best way to do this.

I'm wondering if doing a lower DB on the IUL and supplementing with more term would be better in the long term. What do you guys think?

 

[pfg1]

IMO, any consistently underfunded IUL will have tough chance of making it. Be careful what you are selling them on. A $500k DB should have a much higher premium, imo. Also, if you are running your illustrations at the max rate, imo its a good idea to drop that by at least 1%. I run no more than 6%.

At least you are staying busy and trying to learn, that is great for a new agent. Where are you finding your clients?

 

[Dins]

IMO, any consistently underfunded IUL will have tough chance of making it. Be careful what you are selling them on. A $500k DB should have a much higher premium, imo. Also, if you are running your illustrations at the max rate, imo its a good idea to drop that by at least 1%. I run no more than 6%.

At least you are staying busy and trying to learn, that is great for a new agent. Where are you finding your clients?

Ok, I get it. I either need to either have the client raise the budget on his and the wife's policy to above target, or lower the DB on the IUL and supplement with term. Right?

All this started when I pitched the solution to a client while doing policy reviews on my current book. They liked it and started referring me to family and friends, then those people started referring me as well. Now I have my hands full with IUL clients, and I need my knowledge to catch up with my caseload. Your help is much appreciated!

 

[junkman]

Illustration wars have been going on for years and many seemingly "better" policies have crashed because - things change and many assumptions are inherent in the illustrations. How does your policy stack up against the in-force based on guarantees? What is the status of the cancer? Aggressive in remission is different than relatively minor and likely taken care of.

Make SURE the in-force on the husband will stay in-force when push comes to shove. It's one thing to look long term when everyone is working and healthy and you expect to have time on your side. Serious illness calls for piling up cash and circling the wagons.

What happens when your high premium recommendation goes down because the husband gets sick and the wife quits working to take care of him? Put 20yr term on the wife. You'll convert it later after things settle down. Get in-force illustrations on the husband under various funding scenarios to be sure it stays. If he really isn't healthy look at whether any of the GI stuff you'd never buy unless forced to makes sense.

I remember one agent in the office used to run illustrations out to age 100. He'd maxfund them then show withdrawals at age 65 to 100. The close was "when you're on your way around the world, stop off in Hawaii and see me. I'll be the little man sitting on the beach with his feet covered up in sand."

On 1 case policies were illustrated on the older husband who had health problems but could pass and his younger healthy wife. He bought on the wife then died. The policy on the wife lapsed and there was virtually nothing on the husband. That was what we call a greedy sale and people would almost snatch the pen out of his hand to sign the app. Unfortunately, it cost his family.

Your thought process seems to be looking more at your own pocket than it is at helping the family. Cash is king. People don't like to admit that health problems can cause them to die (sooner). Your planning recommendations are supposed to work for healthy, sick, working and unemployed. That's what you'd want for yourself, not some high dollar pie in the sky that is only good if everything works out.

If you want to sell some cash value insurance, find some old people who are still healthy and have under funded contracts. Most are. Those people will have money and will still want to leave things to heirs. You'll have access to some cash value and don't necessarily want the new contract to ever be paid up. Calculate the internal rate of return on death benefit at expected mortality + 10 or 20 yrs. 8-10% will sell.

 

[kpbdy99]

I guess I'll be the contrarian here. You've got an uninsurable dad with a recent cancer, a mother with a 4 kids under the age of 10, and you think replacing her old $150K policy with a new $400K IUL, and a new period of contestibility, is in her best interest? I know Dad was thinking college funding and retirement income, but really, he and mom get creamed in a car accident and the guardians get a grand total of $550K? Or she dies and dad gets $400K to raise the kids with, when he's got health issues? That's not going to do much. Unless they're very wealthy already, wth a sizeable chunk of money put away, I'd be putting her in big, fat 20-year term plan with a minimum of $1M that will supplement the family's income needs until the kids are all at least in their 20s. That would be my first goal, and replacing her existing UL with another one doesn't meet the sniff test for me if you're at all concerned about that. A $1M, 20-year term plan, even at standard rates, is going to cost about what 3 months of the IUL is. Any extra money you throw at Dad's policy, since he's stuck with it for now.

 

[junkman]

Hang around for a while. You'll learn that insurance is for "what happens when". I lived through the 12% years when the illustrations would have you believe that the world would be covered up in dollars and roses. 30 years later, those that bought term still need insurance and those with underfunded UL in whatever flavor ......still need coverage. None of the policies performed as projected even when we cut the illustrated rate by 50% of current. Sell the guarantees. Buy enough face value to get the job done at low enough premiums that the contracts will stay in force through the storm.

My peers are in their 50s and 60s. Guess what? They don't get hired making more when their company gets bought and the job goes bye bye. People get sick for extended periods including spouses. Many times they recover - and end up working for less. Sometimes they become self employed. Those with money decide to work less and go play. Insurance needs to be there regardless.

People don't become disappointed when they buy the guarantees. Consider writing a letter that stays with the policy that sets out the reason for the policies. Make note of any assumptions including that premiums are paid on time and loans aren't taken until xxxx time.

 

[pfg1]

^^^ one of the reasons I love WL.