How does it work....?

[ims01]

Tony,

If you are averaging $300 NAP per case, you are going to go broke. You should find that your average will be much higher. Depending on the lead type our average runs $930 - $1190. Most agents will find their break-even (after lead cost) around $400/$500 NAP/case if you have a reasonable close and placement ratio.

There are only a few ways to increase your income:
Buy more leads
Improve Close and Placement ratios
Get higher commission (based on actual production)
Sell 20 and 30 year terms as much as possible (31 -35 yr. with AIG)
Increase your average premium per sale

 

[Charpress]

Or...

Work with an attorney who is knowledgeable in estate planning and particularly with life insurance trusts.

Since it is becoming more and more probable that the estate tax exemption is going back to $1 million in 2011, the market for life insurance to help pay estate taxes is going back up again.

I have one application in now for a second to die with an annual premium of $45k. The man was gifting that much to his children anyway. Now it is going into an ILIT with enough coverage to take care of the kid's estate taxes.

Finding an attorney who does not already have connections with insurance people is the hard part. Part of the key here is that the attorney, if he/she really does a good deal of estate work, is already connected with clients with potential estate tax problems and the ability to pay high premiums.

 

[djs]

A need-based analysis is pretty straight-forward. Here's one I just did yesterday.

Married couple, He's an attorney pulling $105,000/year and she stays at home with the two babies (twins, age 4). Current net worth is $2.1MM.


Income Replacement for 14 years: $1,470,000
Kid #1 College for 5 years @ $40,000: $200,000
Kid #2 College for 5 years @ $40,000: $200,000
Kid #1 Trust Fund: $200,000
Kid #2 Trust Fund: $200,000
Wife's retirement needs: $1,500,000
Final Expenses, misc: $50,000

Total Need: $3,820,000
__________________________________________

Total Need: $3,820,000
Less Current Net Worth: $2,100,000


Total Life Coverage Needed: $1,720,000

This is a pretty typical needs analysis. It's the way most agents are trained to do them. Problem is, they double count a lot of expenses, though in doing so, may still leave the db short.

For example, if you are replacing 14 years of income, I assume this is the Present Value of his future income (if not, why not). Now, if you are replacing the income that would normally pay for things like the childrens education, why do you need to count the childs education a second time? Do the children only go to school if the parent dies?

Same question about the wifes retirement needs. How would this be funded if he didn't die?

It still works though, simply because income inflation is not accounted for in many of these analysis.

You also have to be careful. Using this can talk you right out of a simple life sale. If you know someone might part with $25 a month, but not $200 a month, I simply talk about income replacement for 5 to 7 years, get the family through the immediate need, pointing out that this really isn't sufficient, but it's a start. Next year, we'll sit down and do it all over again, trying to move some of this term policy into a perm policy.

My average policy is probably a $1M death benefit, though sometimes split between term and perm. A 30 year old, healthy, with paramed, can easily afford this, in the same price range you are talking for only a $100K.

Dan

 

[slushhhpuppie]

For example, if you are replacing 14 years of income, I assume this is the Present Value of his future income (if not, why not).

The present value of his future income..... sorry, my crystal ball seems to be broken today.

Now, if you are replacing the income that would normally pay for things like the childrens education, why do you need to count the childs education a second time? Do the children only go to school if the parent dies?

I didn't count the education twice, kids are twins if you read the illustration.

Same question about the wifes retirement needs. How would this be funded if he didn't die?

By him, over all of those prime earning years he has left. If he's dead, no one's winning the bread and putting it away for retirement.


Affluent people tend to be bottom-line people, and bottom-line people want bottom-line answers. Overcomplicating the issue with lots of ink & paper is more often than not perceived as smoke & mirrors to rick folks.

 

[djs]

I got the part that there were 2 kids, though I missed them being twins. By double counting, I meant that it was already included in the income replacement.

In other words, if I make $100K a year, and I'm setting aside 10K a year for my childs education, if I die, I don't need the $100K a year income replacement, PLUS 10K a year for education, I either need 90K a year + 10K, or more simply, $100K a year, which will continue to fund the future education. (this is a way oversimplification).

Also, if I make a 100K a year, I need 1,000,000 invested at 10% return to continue my 100K a year salary for my family. Again, a simplification, not dealing with tax variances, etc, but a reasonable simplification for those who don't like a lot of ink and paper (which I completely agree with).

Again, I don't disagree with the final number, I just personally have always felt the method used to derive it was a bunch of smoke and mirrors. I stand alone on this in almost every conversation, no big deal.

I use a simpler method dealing with Joe Six-Pack and his wife.

Joe - you make 50K a year.
Sally - you make 50K a year.

Together, after taxes, you are taking home about $72K, or 6,000 a month. Let's look at where that money goes:

Mortgage $2000
Food $800
Cars and gas $1000
Piano lessons $100
Swim lessons $100
Vacation savings $500
Utilities $400
Entertainment $1100

(use their numbers, I made this all up)

Okay Joe, now lets say your income isn't available to the family anymore. Do me a favor, and scratch out what Sally won't do anymore so she can make ends meet. Voila, they will write 2 checks before they line anything out (one for each of the policies).

I use this to make them think about what the income really is. I try not to talk so much about dollars, but what those dollars mean to the family. It can be tough to make the transition in the conversation, but if you do, you'll close a lot of life.

Dan

 

[moonlightandmargaritas]

Excellent approach.

 

[Delta76]

I also like that approach, it would be easy to make a DI connection at the same time, after all, all insurance comes down to cash flow.

 

[Guest]

Thus far no one has brought social security survivor's benefits into the analysis (not that it is much, but I think it is worth a mention).

 

[lifeinsuranceguy]

The money is in Estate Planning.

Target Premiums in the range of 295k.

If you're doing term, its about volume and finding the right clients, working with business owners for buy-sell, key person, split dollar plans etc.