Life Insurance Premium/Income ratio

[bill3173]

I have a old, not so old, client that is applying for a Whole life policy for he and wife. I attempted to steer them to GUL, so he steered me back to Whole Life. He has a good income, but imo not sufficient to justify the premium he will pay for WL coverage. Fortunately, they are both a preferred risk.

It's not like taking food out of baby's mouth, at his income level >$200K, but the policy he wants is ~9% of income. That is significantly higher than anything I would ever suggest. I have several clients with incomes $300K+ and not one is spending that kind of money on life premiums, even older ones that probably would be okay doing it.

Curious as to how some of you, who may have had clients that kinda sorta went off the common sense track with premiums, handled it?

 

[Allen Trent]

I have a old, not so old, client that is applying for a Whole life policy for he and wife. I attempted to steer them to GUL, so he steered me back to Whole Life. He has a good income, but imo not sufficient to justify the premium he will pay for WL coverage. Fortunately, they are both a preferred risk.

It's not like taking food out of baby's mouth, at his income level >$200K, but the policy he wants is ~9% of income. That is significantly higher than anything I would ever suggest. I have several clients with incomes $300K+ and not one is spending that kind of money on life premiums, even older ones that probably would be okay doing it.

Curious as to how some of you, who may have had clients that kinda sorta went off the common sense track with premiums, handled it?

Income isnt the only source they may be planning to pay premiums over time. IE: depending on current age they may know they have SS coming in a few years, they may have sizeable 401k funds they know they will have to receive distributions from. They may have have a tremendous amount in bank savings/money market, etc.

Many carriers have formulas for how much they will allow of income or assets to be committed.

 

[Lloyds of Lubbock]

I dont think it is out of line.
He could have reduced his contribution to a 401k and has use of that.
He may be spending down another asset.
Maybe a debt was paid off and he has use of that money.
It is not like he is throwing this money down the toilet.
Design a policy that has reasonable early cash values in case of emergency.
He will have access to the c/v via loan, withdrawl even use as collateral with a 3rd party lender.
He steerered you back to whole life: did you ask why?

 

[Life Hawk]

It's not like taking food out of baby's mouth, at his income level >$200K, but the policy he wants is ~9% of income.

As an FE agent I usually run a 10% max of income for most of my suggested coverage. Of course not dealing with $200K earners, but I believe the percentage holds.

He steerered you back to whole life: did you ask why?

That is a great question! The difference between helping a client get what they are looking for or being sold what we think. He may not be telling you the whole story. High earners seem to very rarely be totally up front and you often have to ask many follow-up questions to better understand their thinking.