Insurance as income replacement? and funding???

"marcircus"

James,

1. Is that 3% of gross income or net?

2. Are you are getting them seperate DI contracts? Or are you getting them DI riders on the WL/UL policies you will write?

That depends, more than likely if you go thru Standard or Union for the RN using a more friendly "Own Occupation" contract it'll be higher or about gross if not more. For him, a blue collar you will be hard press to meet the wording of the Union or Standard "Own Occupation" but the price will likely be less if you use Assurity for him. LOL, this is such a great business, I'm now looking at ending two Assurity Products only to bring Assurity back into play with other contracts! I am a solid believer that the Insurance Industry hasn't done enough promoting the need for a DI coverage, it is if not the most needed runs a close second with life esp. if you take into the effect of medical technology and our ability to keep people alive more so than in the past.

Yet this depends, likely you'll find few instances where the clients will pull the trigger and involve themselves with more than one or two expensive insurance contracts in this case I'm sure I can get two, one for life and one for DI, if I can't then I sell two life that can aid with DI, CI and or LTC coverage with ryders. Yet I still have to build up the "Need" enough for the couple to face the facts that all and any future investments and growth is at serious risk if certain issues are not address such as the need for DI or Life to cover obvious risk, lets face it at this age they are more likely to use a DI than Life payout.

1. Is the budget you refer to the budget after the needs analysis meaning how much money is coming in, (thus showing the $500/mo WL policy is more than adequate), or

2. going over their personal spending to find the $500 to pay for the WL/UL policy.

My reason for asking, given the scenario you painted, I still do not see where they will be able to draw the $500/mo to pay for a policy. Though, I plainly see where you have demonstrated to them that the policy a $500/mo payment would buy would adequately provide for their needs should one spouse die.

Do you understand my question or is it clear as mud?

Yes, I understand what you are saying. You are ahead of me on this, sorry but been busy that last week so I'm behind on this. I'm fixing if I can show them that they need this is take limited money out of their savings to cover life and DI. I'm planning on throwing out a bone to those on this board that like EIUL and throw out an table a Indineapolis UL product that has a guarantee 4% floor for far less than a 5 grand out of pocket expense, in fact if I can pull out money of the floating 401k money that you will find and in fact that man is thinking of pulling it out to buy a new Bass Boat something else all too common! So the needs analyzes and showing them the need to protect today is greater than a new bass boat, that is the Key Selling Point. Yet a lot of this depends upon how well that MF he has floating out there is performing, remember this is from a previous employer and not directly manage by him, more than likely as I posted in other threads the odds are on my side that it isn't performing any better than 4-5%.
 
James,

You are ahead of me on this, sorry but been busy that last week so I'm behind on this.

Glad to hear you were busy, that is if it was because you were sitting there with cute nurses writing them contracts.

Please ignore this post if it will interfere with the scenario you are painting
and the natural progression of the outcome to this.

You will be proposing taking money out of 401(k) to help pay for this? Won't there be a 10% penalty and taxes due? Or can you use a UL/WL policy to fund an IRA, if you can, I never knew that. Ofcourse if he was going to do it for the Bass boat anyway ......

And on a side note, I strongly urge you to consider going to your junior college and seeing what kinds of courses they offer. If they have an insurance class for those students in a finance or business curriculum, man would you be a natural gifted instructor. If they don't have a course, you should approach the department head and propose one. As to the previous statement, I am as serious as you can imagine. You are interesting, articulate, and knowledgeable.

Now the joking part, I am halfway hesitant to post it because it might detract from the serious posting in the last paragraph. But I have read so much from you I feel I almost know you so I can joke around with you, and there is an element of truth. So here goes. By doing that, you will also be expanding your COI with the other staff at the college. :D
 
Well lets go ahead an compare a EIUL, Ind. Life with a guarantee floor of 4% to a Mass Mutual WL 9900 series.

The UL from Ind. Life: http://f1.grp.yahoofs.com/v1/QJC8RR...Vhcp7RnUzrykPzASvy63IQE/sample of UL male.pdf

The WL from Mass Mut.: http://f1.grp.yahoofs.com/v1/QJC8RU...mNoC6jBO6izWiC_q5Bg1hC8YjQaCqDk/MM sample.pdf

Age 70 under the assumption rate of MM the CV is $255,513 and the DB is at $442,396. With the UL the CV is $300,940 and the DB is $346,081. So the decision here is to you have more confidence in the market options of the Ind. UL or the management team of Mass Mutual? Plus the Mass Mutual is projecting here a 5.2% rate of growth not 5.65% as the UL is. Either can go up or down obviously, yet though Mass Mutual last year had their strongest returns (dividends) over their long history of existence so no they are not likely to perform badly as time goes on, they seem only to be getting better.

Ps now if we go to contractual language of the two the WL will look a lot more friendly! Lot of wedge issues can be found there!
 
Now we have to consider the cost of DI, ranging from 1-3% of income as a general rule I'm going to make an educated guess that the RN is looking at 2.5% including a Non-Can Policy with Cola and the option to buy more at the same rate. So she can expect to pay $1,125.00 a year. I'm going with either Union or Berkshire.

For the husband, I would suggest a Met and seek a "Your Occupation" type of wording unlike the language of the wife which I would seek "Own Occupation". The cost would likely be about 2% or $700 a year both paying 65% of income.

This is what I think is important to look for:

1) Guaranteed Renew and Non Cancellable
2) Definition of total disability (own occ available?)
3) Definition of residual (partial) disability
4) Return to work (recovery) benefit rider definition.
5) Purchase additional coverage guarantee.

Now basically we are looking at 2 grand a year and does this effect the couple ability to buy this and my presented plan. So now we are at around 5 grand and still have to achieve a Life Policy for the wife. I mean if we are restricted to working around 5 hundred a month or 6 grand a year of out of pocket money.
 
Deal done! Sold 4 DI policies, two each for income of each client and two additional for investment protection under the advisement of the IA that they consulted for a second opinion and revamp their investment portfolio. Plus I change the term contracts, they went with Mass Mutual 5 year term, 250 grand each. That is Renewable and Convertible, the idea is when their financial picture change they will move into a solid life policy. You never know how these things work out, turns out they were more interested in DI protection. It would seem that since both had the ability to provide for themselves income replacement in case of death was not as important as some suggest.
 
Wow James, One heck of a treatise you have there!

Let me ask. What do you tell these people to do with their policies when they get old? the assumption could be made that the UL could become self-supporting. What will they do with the WL. Switch the dividends from accumulate to apply towards the premium, freeze the DB? What kind of WL is this anyway( the links do not work for me) are you buying additional units or just adding them to the CV (I assumed it was participating)?

Thanks.
 
marcircus said:
Wow James, One heck of a treatise you have there!

Let me ask. What do you tell these people to do with their policies when they get old? the assumption could be made that the UL could become self-supporting. What will they do with the WL. Switch the dividends from accumulate to apply towards the premium, freeze the DB? What kind of WL is this anyway( the links do not work for me) are you buying additional units or just adding them to the CV (I assumed it was participating)?

Thanks.

Try the links again, they seem to work for me. If not let me know and I guess I can email you the files?

Ps the files are Acrobat files, hosted here under files. http://finance.groups.yahoo.com/group/insurance_superstars/ started by one of our very own great agents.
 
James,

1. Posting to bump this, I think this is a terrible waste of effort and talent if no one discusses it. I sure as heck would like to see professionals talk about this one.

2. I have been thinking about this posting a long time. Unfortunately, I cannot articulate a coherent question my mind is nagging at me to ask.

Let me try.

Can people really afford the life insurance they need?

Why I ask - - I am not that old. I work with many people older than me that tell me the car they just bought, cost as much or more than their first house.

I know when I was in junior high school, a nice, modest home was selling for under $20,000.00 This would be around 1969. So back then, an $80,000 policy might have seemed like alot. But $80,000 today, does not put you on easy street. I don't know if I have explained myself.

One more try. In order to actually get the contract you need, you have to accoount for inflation. So yes, James, If you sat down with me today and talked me out of a Bass boat for my familly's security, I might think a $400,000 DB might do just fine. If I die in 26 days, they will have ample protection. I die in 26 or 36 years, that $400,000 will just not look so impressive. Hence my question. Can people really afford the LI policy they need. Instead of buying $400,000 in LI maybe to account for inflation, they should buy $1 million. But, they could not afford $1 million.

Thanks alot James. I hope my question is somewhat coherent.
 
I understand what you are saying, and the answer today is that a pure death benefit is cheaper than it has ever been. Depending upon who we are talking about, that is why as a life agent you have to sit down and do a review and come up with a plan. Only thing I'm saying basically is for a agent do sell on one number and one size fits all such as the 20X Income Replacement is not performing any Fiduciary or Suitability standards that should be standard practice.

Yet though, I have done this several times if not many. I walk into a meeting and find out that the previous agent didn't do a review and sold stricly on the 20X factor, that is a guarantee sale for me. That policy is gone, I sell either more or less, but even though I never say it the feeling of the client will be that the other agent was nothing more than a commission whore when I'm done. Now I never directly bad mouth any one, just don't have to. People shouldn't infer but they always do, its human nature. "Oh, your previous agent never did a Needs Analyzes?, well than how do you know for sure that this amount is correct?" "Are you going to be in the same financial picture in 30 years since this is a 30 year contract? Do we even have an educated guess on where you will be next year much or less 30 years???" "Lets do this, even though this will take about an hour of your time lets go ahead and take care of it now and than we will have a better picture of what your financial future needs may be".

Remember the question you ask depends on things we simply don't know and we never will untill you sit down and understand whom you are working with.
 
marcircus said:
James,

........Can people really afford the life insurance they need?

Why I ask - - I am not that old. I work with many people older than me that tell me the car they just bought, cost as much or more than their first house.

I know when I was in junior high school, a nice, modest home was selling for under $20,000.00 This would be around 1969. So back then, an $80,000 policy might have seemed like alot. But $80,000 today, does not put you on easy street. I don't know if I have explained myself.

One more try. In order to actually get the contract you need, you have to accoount for inflation. So yes, James, If you sat down with me today and talked me out of a Bass boat for my familly's security, I might think a $400,000 DB might do just fine. If I die in 26 days, they will have ample protection. I die in 26 or 36 years, that $400,000 will just not look so impressive. Hence my question. Can people really afford the LI policy they need. Instead of buying $400,000 in LI maybe to account for inflation, they should buy $1 million. But, they could not afford $1 million.

Thanks alot James. I hope my question is somewhat coherent.

Good points.

Affordability is an issue, sure. People view it as an outlay, a BILL.

Most always will, regardless of how we've been trained professionally to counter those vibes.

And shelling out, say 5, or 10 grand each year in premium renewals, on an intangible good/service they aren't consuming isn't an easy pill for anyone to swallow.

Which is why the industry had to get cute with hybird products like VUL, etc.

No one wakes up one day and says, "It's a beautiful sunny day. Rather than go shop for a bass boat, I think I'll go shop for some LI."
 

Latest posts

Back
Top