Income Stream Death Benefit

Dec 18, 2015

  1. BrianLeising
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    BrianLeising New Member

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    I’d like to help you close more life insurance sales by showing how an income stream death benefit can help your clients save money and better understand how their coverage works. We will explore the problem, present a money-saving solution and work to simplify it all for our clients.

    The Problem

    How many people do you quote term life insurance for every year but never take action? Many of those people did not purchase life insurance from someone else. They are still uninsured. How can you get them back in your office? You may need to revise your approach. How do you determine how much coverage a person needs? What needs analysis system do you use?

    Many people do not purchase life insurance because they don’t see the need. Many of those with insurance have no idea why they purchased the amount they have. The amount was likely a random number they picked among many their agent presented. If an analysis was conducted, they may have been intimidated or confused by the large face amount presented. Many people do not understand how large a lump sum is actually needed to provide adequate income replacement.

    What’s the solution?

    1. Conduct a needs analysis with everyone you see, discuss paying off debts and funeral expenses, funds for college and income replacement.

    2. Instead of a lump sum for their income replacement needs, use an income stream death benefit to clearly show how life insurance fulfills a client’s needs. Several insurance companies offer clients the exact income amount and time period they need to replace lost income. Better yet, clients receive a discount when choosing an income stream rather than purchasing a lump sum. For example, assuming a male age 35 receiving the best available rate class, $1,000,000 of 30 year term would cost $814 per year. If the need was actually to provide $50,000 per year for 20 years (still a $1,000,000 pay-out) the client could pay as little as $647.75 per year using an income stream death benefit option. That’s about a 20% savings in annual premiums amounting to a total of nearly $5000 over the life of the 30 year term policy.

    Make it easy

    I realize the example in part two did not take into account the fact that a beneficiary receiving a lump sum could invest that amount and receive more than the lump sum divided by 20 each year over 20 years. Assuming a modest 3% interest rate, $735,490 would provide the beneficiary $50,000 per year for 20 years. A 30 year term life policy based on that face amount would cost only $638 per year. That’s actually slightly lower than the income stream death benefit price of $647.75 quoted previously. Why would a client pay an extra dollar per month for the income stream? Simplicity. What’s easier to understand: “$50,000 for 20 years” or “$735,490 invested at 3% should generate an income stream of $50,000 per year for 20 years. “

    Sometimes we fail to understand the majority of the population does not deal with interest rates, inflation and compound growth on a daily basis. Keep it simple.

    For income replacement life insurance sales, consider using the income stream death benefit option. It will help you close more life insurance sales, potentially save your clients money and certainly give them a better understanding of how their coverage works.
     
  2. WinoBlues
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    WinoBlues Guru

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    OK, I was reading this waiting for the pitch which did not come.

    I agree that many if not most of my clients think in terms of monthly income and out go. Thank you for your post, reminded me of something I used to include in my client conversations.
     
  3. wln417
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    wln417 Guru

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    What about inflation? How much will that $50,000 be worth in the 10th year? 15th year? How do you account for that?
     
    wln417, Dec 18, 2015
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  4. BrianLeising
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    BrianLeising New Member

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    To account for inflation you would have to increase the income stream from the beginning. These products do not have an increasing benefit option. Keep in mind, this sort of repositioning of the income replacement death benefit need works best with less sophisticated clients. Think of people who would be too confused by the concept of a lump sum providing an inflation-adjusted increasing benefit amount each year. You have to keep it real simple with some people or they won't purchase a policy at all.
     
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