Not my Forte

[STIBROKER]

I pay premiums for 20 years, don't die and lose all my money. Sounds like a genius business decision. Am I missing something on this one?

How much of your homewoner's premium do you get back? How about that auto insurance? They offer a huge refund, don't they? Maybe your medical insurance does that? No? O.K., dental, DI? Why is it only life insurance where people think they have wasted money?

Insurance is a transfer of risk. Life insurance included. My goal is to pay for all types of insurance and hope I never have to use them. I need at least $1,000,000 of life coverage while my children are young. I can spend about $600 per year for a 20-year term. Or around $1,000 per year for a 30-year term. Or I could spend about $5k per year for a GPUL. Maybe I don't have an extra $4k to spend to get the coverage I NEED. But let's say I do have $5k per year to spend. Let's say I opt for the 30-year term and invest the $4k difference in premium and earn 8%. At the end of 30 years I have nearly $500k saved up. Or I could have $100k-$150k cash value in that GPUL policy. You tell me which one is better.

In addition, you can get a Return of Premium Term policy these days. So at the end of the term period, you get all your money back.

WELL PUT............

 

[James]

I pay premiums for 20 years, don't die and lose all my money. Sounds like a genius business decision. Am I missing something on this one?

How much of your homewoner's premium do you get back? How about that auto insurance? They offer a huge refund, don't they? Maybe your medical insurance does that? No? O.K., dental, DI? Why is it only life insurance where people think they have wasted money?

Insurance is a transfer of risk. Life insurance included. My goal is to pay for all types of insurance and hope I never have to use them. I need at least $1,000,000 of life coverage while my children are young. I can spend about $600 per year for a 20-year term. Or around $1,000 per year for a 30-year term. Or I could spend about $5k per year for a GPUL. Maybe I don't have an extra $4k to spend to get the coverage I NEED. But let's say I do have $5k per year to spend. Let's say I opt for the 30-year term and invest the $4k difference in premium and earn 8%. At the end of 30 years I have nearly $500k saved up. Or I could have $100k-$150k cash value in that GPUL policy. You tell me which one is better.

In addition, you can get a Return of Premium Term policy these days. So at the end of the term period, you get all your money back.

Well depending, if you are only getting 2% from your insurance contract and if you really get 8% from your investment. Of course I'm not sure if you are adjusting for fees and taxes from your investment you will be paying every year. It would be nice if you break that down just a little. Now if one gets the more average 4-5% from a good insurance contract and even if you do receive 8-9% once you figure in taxes and fees that money is shaved by several percentage points making the end figure a lot closer then you are suggesting. Plus my money comes with a DB for life, Tax Free usage as in loans of course you can just take money out of your investment free and clear!

 

[sman]

Well depending, if you are only getting 2% from your insurance contract and if you really get 8% from your investment. Of course I'm not sure if you are adjusting for fees and taxes from your investment you will be paying every year. It would be nice if you break that down just a little.

Where do you get the 2% from? Do you know any UL contracts currently paying 2%? I don't. And wouldn't recommend a carrier that does. The rate I used was the current rate (5.00% for years 1-10, and 6.00% thereafter). As we all know, these rates are subject to change, but this is what I used. The carrier is Midland Natioanl Life (I also ran one with ING Reliastar, but they were more expensive).

As for the investment return, I just chose a realistic number. I'll try and address the tax issue a couple of ways. First of all, who's to say that this investment couldn't be in a Roth IRA? That answers the tax question right there. But we'll asssume that it's not within a Roth, if you know anything about the markets, you know there are some great tax sensitive investments out there. Many that have very little tax consequence every year. As for fees, my assumption is net of fees. An 8% return is very realistic over a 30 year period.

Now if one gets the more average 4-5% from a good insurance contract and even if you do receive 8-9% once you figure in taxes and fees that money is shaved by several percentage points making the end figure a lot closer then you are suggesting.

Sorry, wrong again. See above. Now if you wanted to take a non-guaranteed premium UL, the CV would exceed $200k. But we all know what can happen to COI's and interest rates and how that effects a UL. While I'm on this subject, show us what the premium would be for a WL (not a UL) for a 35 year old male, preferred (not preferred plus) for $1,000,000 of coverage.

Plus my money comes with a DB for life, Tax Free usage as in loans of course you can just take money out of your investment free and clear!

And term insurance doesn't go to the beneficiary tax-free? When you use those tax-free loans, what happens to the death benefit on the life insurance policy? It decreases. You also have to account for the COI whether paying any future premiums or not. Also, how does one withdraw money from a Roth IRA? Isn't it tax-free as well?

Look, you have your methods and I have mine. I have no problem with permanent coverage when used properly. But if I have a 30-something couple and they have $5k to spend on insurance and investments, I'm going to make sure they have already funded all retirement vehicles before recommending ANY type of permanent coverage. If they haven't, I'll most likely be recommending a 30-year term policy and a Roth IRA.

 

[James]

First of all I don't like the whole "Retirement" being pulled out in these discussions as if to say "shut up" or "its no longer on the table", that was not in the original question so to bring it in is somewhat underhanded.

Yet the last thing I would do is buy the max amount of DB for Premium when dealing with UL's. Now go back and run your assumptions on 45 hundred going towards 250-500 grand with the other amount being placed on a ten year term, or twenty depending how long the client needs it such as how old is his/her kids.

UL's have to be cash rich in CV side as soon as possible to make them work at an efficent level. Yet when they do and the assumption of 5-6% is realize then they are quite effective. I would suggest even at 4-5% they are effective tools depending of course on the situation. Take a Contractor that carries a hefty amount of debt, this person can use a good CV Policy for the simple tool of safe money free from the grasp of creditors. Just one little sample out of a pool of many. That is why if you are going to sell UL's you have to look for prospects that have the ability to rotate money around without effecting their bottom line. I would suggest 20-30% of the population has ability in one fashion or another to do this depending of course on the actual situation or 2 or 3 out of ten.

 

[sman]

First of all I don't like the whole "Retirement" being pulled out in these discussions as if to say "shut up" or "its no longer on the table", that was not in the original question so to bring it in is somewhat underhanded.

Oh yeah, that's being underhanded. Give me a break. I showed both scenarios. Look, it's obvious you have your mind made up. I simply believe there is a better way. You don't have to believe that.

Yet the last thing I would do is buy the max amount of DB for Premium when dealing with UL's. Now go back and run your assumptions on 45 hundred going towards 250-500 grand with the other amount being placed on a ten year term, or twenty depending how long the client needs it such as how old is his/her kids.

You still won't have as much money as the alternative I provided.

UL's have to be cash rich in CV side as soon as possible to make them work at an efficent level. Yet when they do and the assumption of 5-6% is realize then they are quite effective. I would suggest even at 4-5% they are effective tools depending of course on the situation. Take a Contractor that carries a hefty amount of debt, this person can use a good CV Policy for the simple tool of safe money free from the grasp of creditors. Just one little sample out of a pool of many. That is why if you are going to sell UL's you have to look for prospects that have the ability to rotate money around without effecting their bottom line. I would suggest 20-30% of the population has ability in one fashion or another to do this depending of course on the actual situation or 2 or 3 out of ten.

If you say so. I do like how you responded to my questions in the previous post. Oh, wait a minute, you didn't.

 

[James]

If you say so. I do like how you responded to my questions in the previous post. Oh, wait a minute, you didn't.

LOL, you got seven questions, which one is it you was expecting an answer to?

 

[sman]

which one is it you was expecting an answer to?

Talking about LOL.

 

[James]

which one is it you was expecting an answer to?

Talking about LOL.

Okay I see that, yet I'm not going to attempt to answer questions that are no more then "Straw Men" type of issues. When attempting to come up with a good fudiciary idea of when too sell a UL or W/L or be in the best position is when one is prospecting. We know people are fickled as can be, some like securities such as MF's, Stocks, Bonds etc etc in or not in a Qualified Plan, yet you have others that do not favor such vehicles. In fact some hate these vehicles and really dislike the whole 401 type of account. Now I'm not saying not to sell that cheap term policy some think is sent directly from above high and ordained by God himself, if that is how they feel fine with me!

Yet you'll find about 50% (a guess) that will listen and be open to the W/L or UL contract and the CV idea in general. Many more also would listen to the idea of the Annuity and a "Secured Life Long Income" these do provide. Yet specifically the UL, is not the same as a W/L, I mean if they are looking for W/L type of idea then by all means, yet some have a strong need of a good UL Policy. Yes it is more expensive, TINSTAAFL, you have to pay for the flexiblility.

I have a friend looking for a $100K life policy. He's a 49 year old smoker.

I have never dealth with the larger policies and don't understand them as well as my normal products.

Any recommendations on what type of policy and what company to look for?

Thanks!

John Hancock, 3 grand a year or about 250 a month will secure him with a solid company, solid returns history and a DB that only climbs. In twenty years his CV will be about the same as his contribution and his DB is about twice the amount.

First Colony smoker term for twenty, that is as far as they will go on a 49 yr old period. Cost is right at a 1 grand a year if he isn't rated beyond a normal use tobacco.

West Coast Life 25 yr term for him not rated a smoker at 49 doesn't qualify for 30 years. So 25 is best you can buy, and not rated cost is right at 15 hundred a year.

AIG ROP for twenty years, is right at 22 hundred a year for this smoker of 49. Of course he gets his money back on this one and can go out and purchase a One Pay W/L with his 45 grand. Of course I'm not sure what that will buy a 69 yr old that is a smoker?

 

[Superchief]

Why is it only life insurance where people think they have wasted money?

I understand your point here, and I'm sorry I didn't make myself more clear. Why would someone buy a Term policy when they can purchase a policy that builds cash value or works more like an investment?

I mean, if I could get car insurance that gave me money back for not wrecking my car in 20 years, I'd buy that instead of the other.

My question again was WHY would they purchase a Term when they have better options available? What are the advantages if any?

So far I'm looking closer at a UL policy through Monumental. Dynamic II

Anyone familiar with this?

Thanks!

 

[James]

Why is it only life insurance where people think they have wasted money?

I understand your point here, and I'm sorry I didn;t mke myself more clear. Why would someone buy a Term policy when they can purchase a policy that builds cash value or works more like an investment?

I mean, if I could get car insurance that gave me money back for not wrecking my car in 20 years, I'd buy that instead of the other.

My question again was WHY would they purchase a Term when they have better options available? What are the advantages if any?

So far I'm looking closer at a UL policy through Monumental. Dynamic II

Anyone familiar with this?

Thanks!

Personally, if I was offering something and all they were concerned about was a DB then I would stick with W/L then a UL. The ING Guarantee UL is right at 21 hundred a year, how much is the monumental D II?

I see it this way, I walk in an offer John Hancock W/L for just about 80 dollars more a month after you sell him a UL ING or Momumental (I'm not sure about the cost?) that has no CV in twenty years I betcha I have a sale.