Good Income Generator

[dimpil1]

Okay, real life.

Female client had 2 policies. 3k and 3k. She was paying total of $58 per month for both. She had a total cash value in both $2,470. ($170 in one the $2300 in the other). I surrendered both 3k's, she will be recieving $2,470 and wrote her 1 new policy for 7k for $49 per month. Put her policies on direct bill, until this is issued and enforce.

I can see that someone may think they still have the old policy, but they will be still making a payment on the new policy, sometimes at the same, lower or slightly higher payment. They have the cash and we do go over everything.

At any rate It works for me and I'm keeping it. My clients seem to be happy, as some have used the extra money get caught up on bills, have some cushion in the bank for life little troubles and are not waiting for the social security checks before they can pay the gas or electric bills.

May not work for every client, may not work for every agent, but I feel good about leaving them with less to pay and cash in hand.

 

[midwestbroker]

Scratch some of that last post, I was thinking loan and not surrender when it came to taxes.

While you are doing right by your client, I would watch your verbiage. You do not want to think the carrier of the old policy owes them a rebate.

Kind of like calling a MA plan a supplement. Technically, it is a supplement to Medicare. However, since there is another form of insurance with the proper name of supplement, you cannot call it that. You may know what you are talking about, but that does not mean the client does.

I like Don Runge with do you have the old type of insurance or new type? What I do is hand them my card at the end of the presentation and point to life insurance listed on it and say something along the lines of:

"I also help people with older life contracts to convert them to newer ones usually with lower cost and higher benefits. Do you have old or new policies?"

Like I mentioned, something along those lines, but I get a lot of response from it.

 

[Mr. Bill]

How exactly do you explain the tax consequences?

 

[myinsurebiz]

" How exactly do you explain the tax consequences? "

Wouldn't tax be due only on the interest earned portion? Especially if it was funded with post tax $$ ?

Just curious.

Tom

 

[Mr. Bill]

Yes...but again, this appeared to be left out of the "coversation" - most people when they hear "refund" are not hearing "taxable"

 

[dimpil1]

Mr. Bill, there are no taxes on the money as it is after tax money they used to pay the prem in the 1st place and there is no interest accumulation on the cash value. Like keeping $$ in the cookie jar after you got paid and waited years to take it to the bank. Why would you pay additional tax on money that hadn't any accumulation of interest and that was taxed from your paycheck all those years?? The insurance companies do not generate a 1099 as the majority of premiums are post tax dollars (there are some that are pre tax but have not run into those thus far).

Midwest, thanks for that, I will adjust my language as this has not occured to me, and others at the office I'm sure. I'll also mention to all about Pru and Met in the early 90's.

 

[Winter_123]

Mr. Bill, there are no taxes on the money as it is after tax money they used to pay the prem in the 1st place and there is no interest accumulation on the cash value. Like keeping $$ in the cookie jar after you got paid and waited years to take it to the bank. Why would you pay additional tax on money that hadn't any accumulation of interest and that was taxed from your paycheck all those years?? The insurance companies do not generate a 1099 as the majority of premiums are post tax dollars (there are some that are pre tax but have not run into those thus far).

Midwest, thanks for that, I will adjust my language as this has not occured to me, and others at the office I'm sure. I'll also mention to all about Pru and Met in the early 90's.

I am uneasy about this type of scenario, and as noted, it is not unlike the situation with Pru. The class action with Pru had to do with agents systematically taking older folks who had policies that were sold to them originally with the idea that they would be paid up at a certain point. Then, down the road, Pru sent its agents out with the latest and greatest product which essentially removed the cash value but got them into a long term premium payment again at an age when they expected to be paid up or needed to be paid up. Plus, I dont like all of this happy talk about refunds. The term refund sounds like the return of an excess payment of some sort that is not needed to meet any obligations. That is not true if being paid up was one of the goals.

This scheme sounds more like it is driven by what an agent can do to get a commission versus what you would want want for your father or mother. Undoubtedly, there are some instances where the exisiting policy is so bad that replacement and a new plan are desireable. We all know that but it also sounds like in this instance agents are systematically doing it just because it can be done.

I might change my thinking with more facts but it sounds shlocky to me at this time.

Winter

 

[somarco]

there are no taxes on the money as it is after tax money they used to pay the prem in the 1st place

You might want to review the tax code before making this statement . . .

The class action with Pru had to do with agents systematically taking older folks who had policies that were sold to them originally with the idea that they would be paid up at a certain point.

They also had issues with the so-called "vanishing premium" concept.

In addition, you are dealing with the elderly you need to be especially careful about changing plans around. Too many watchdog groups out there accusing agents (many times justified) of tricking them into swapping out an old plan for a new one.

All states have D&R forms that must be used when replacing an older policy with a newer one. Are you filling these out every time & filing it with the application?

 

[wilkin]

The woman with a 3k policy and $2300 in cash value is going to get a 1099 and possibly owe a fair amount in taxes. That's going to shock her.

Replacing old policies like this may seem to help a senior's current cash flow and not reduce their amount of death benefit, but insurance commissioners frown on this and consider it improper. Frankly it usually is and I think we all know it.

To some agents it may seem harmless, but if you do this to enough people eventually you are going to do it to the wrong person who has a son or daughter who is an attorney or cpa or otherwise knowledgeable person looking out for mom or dad. And you are going to end up being fined and lose your license.

 

[somarco]

It will be interesting to see what Dimpil does with this feedback.

On the one hand, he has something that is generating good income. He also has the branch manager role model.

On the other, he has feedback from folks who have been around long enough to have seen what works, what doesn't, and most importantly, what could lead to serious legal problems and financial repurcussions.

Dimpil has been in the industry since 2004.

I entered it in 1973.

I don't have all the answers and I am still learning. I appreciate a new marketing idea as much as anyone.

But I also know a skunk when I see it and I don't have to poke it to prove my theory.