Selling Life Insurance...

[James]

Okay, so let us play a game here. Say he decided to take that $4,400 and move it over to his company 401 account, there is no matching and I'm finding this to be common. Now let us use 8% for the life of the fund including retirement years. Yet he has to go out and buy term, let us use 500 grand since Term's DB does not grow. The cost for him will be about $1,100 annually, so he now has only $3,300 to invest. At 8%, which is better then his current growth, plus we are giving him this till 85. So at retirement age 70 he can start withdrawing 8% for life and the principle should be level if the "risk" doesn't hurt him to bad, basically any down years during the 45 years that may lead to a lower then expected average growth is a real killer of this strategy.

So he has at age 70 the whopping amount of $436,948.13. So this retirement account will net him $34,955.00 annually (minus taxes, 15% or 20%) and when he dies he can pass the $436,948.13 to his spouse or children or whatever. Remember his term ran out at age 70, he has no insurance.

Now how does my strategy rank with this? Good question, and I'm planning on doing just.

 

[James]

Plan A;

So he has at age 70 the whopping amount of $436,948.13. So this retirement account will net him $34,955.00 annually (minus taxes, 15% or 20%) and when he dies he can pass the $436,948.13 to his spouse or children or whatever. Remember his term ran out at age 70, he has no insurance.

Plan B;

Now in ten-twenty-thirty years (not counting the repayment of loan, that only increases the amount significantly) CV and DB.
Ten Years.....$63,314 DB.....$457,000
20 Years.......$151,530 DB.....$650,000
30 Years.......$338,185 DB.....$1,056,000

Now we are in Plan B, how does this stack up to Plan A? Now the results here will vary, since he made either Plan A or B work when he gets to 70 we can consider him a serious type of person. So in Plan B, we have the "IBC" effect which is not demonstrated within the numbers above. If he follows the plan, that he has placed significant amount of capital in to finance something that is important to him, IMHO he'll likely follow it. Now at age 50 his cash value will easily finance a new auto and boat plus smaller purchases. I came up with a figure around 70 grand in CV.

Now I estimate the CV if the plan is used to finance all toys up to year 70 of around 500 grand easily! Which the Dividend Payment would be no less then $35,000 with no taxes due! Yet, you say that Plan A pays the same $35,000, but you have to minus taxes, let us assume 20% or $28,000 of income if he use a so called Traditional 401K. Now if he uses a Roth, which is of course the comeback, great the results are more level.

Now we have the DB, in Plan A he would have his 436 grand still sitting there and will be the DB to beneficiary. Well in Plan B, he has 500 grand sitting there and a DB of no less then 887 grand. In other words if his wife outlives him she can still collect the money as she could in Plan A but the DB will still be there as the CV would still be there as with Plan A.

Not much of a difference? The difference is this, while this client makes good money, he spends his money on "Nice" things like boats, trucks and other toys. Obviously at his age 40 he isn't likely to change, so you can approach him and try to get a few percentage points of his now saving/investing money or you can go for the money he uses to finance his debt. Up to you, just realize on average a person today has a negative saving rate compared to 32% being used to finance his/her debt, which one seems more attractive?

 

[senior-advisor-indiana]

Whoa, final expense is much easier.

 

[James]

Whoa, final expense is much easier.

Yea sure it is, but it isn't nearly as fun!

 

[Guest]

James,

The following is something you posted above. If you could be so kind as to answer two questions regarding your post.


"So basically what we are doing is opening up a $250 grand WL, HECVWL from MM, target premiums of $4,470 and additional $5,000 in year one and two, plus a transfer of $5,000 from a UL he has that is sucking wind (I didn't sell that one to him), that is ended! So he now has $500,000 term and $250,000 WL for a total of $750,000."

1. What is a HECVWL (High Equity Cash Value Whole Life policy?)

2. Regarding the target premiums of $4,470 and additional $5,000 in year one and two: Are there WL policies where you can contribute additional premiums? I thought all WL policies had fixed premiums.

Thanks very much. Reading your posts: they are like reading a very well written story which in reality are a text book. You have lots to teach and offer and the way they are presented are easy and fun to read.

Thanks.

 

[James]

1. What is a HECVWL (High Equity Cash Value Whole Life policy?)

2. Regarding the target premiums of $4,470 and additional $5,000 in year one and two: Are there WL policies where you can contribute additional premiums? I thought all WL policies had fixed premiums.

Thanks very much. Reading your posts: they are like reading a very well written story which in reality are a text book. You have lots to teach and offer and the way they are presented are easy and fun to read.

Thanks.

HECVWL, High Early Cash Value Whole Life by Mass Mutual.

PUA, Paid Up Additions, the policy holder can increase his/her DB, Dividends by sending in additional money on top of the Target Premium. Some also use this to adjust their commissions for their A clients. By choosing a lower TP and/or DB the PUA can increase the DB with far less commissions then the TP.

 

[Guest]

Thanks very much for the explanations James.

 

[dschachter]

I sell mostly DI. I'm 55 and was trained by the best. As an independent agent I quote Principal, Guardian, Met and Standard. As the ecomony worses professionals are stiking out on their own and they need their own Medical AND Disability policies, just like they had when they worked for someone else.

As far as using the internet go get "clients" there are many "lead generation" websites where you can buy leads. Some are very good and some are very bad. You have to go through about 10 to find one good one. And yes they are checking with several sources online. They're doing their due diligence and shopping for the best product.

Use your computer to get new clients while servicing your local clients.

 

[Tx249]

Very Good information James, at least for me it gets me to thinking and that shouldn't hurt.

I really liked your remarks about how you prospect. You said you live in a small town. Looks like around 30,000 with several other smaller towns around it.

How big an area do you need to work to find enough prospects?

By the way the nay sayers actually can be helpful sometimes, those will be some of the same objections you will hear out there working. Might just learn how to answer some of them.

Sounds a little like the Missed Fortune book by Douglas Andrew that I just ordered the other day, and some other Found Money Management stuff I have been reading about.

For Mr. Forgot More Than You Will Ever Know, What does your prospecting consist of? Give me something I can use. I have plenty of mud out by the barn, we had over two inches of rain yesterday.

 

[bobson]

Very Good information James, at least for me it gets me to thinking and that shouldn't hurt.

I really liked your remarks about how you prospect. You said you live in a small town. Looks like around 30,000 with several other smaller towns around it.

How big an area do you need to work to find enough prospects?

By the way the nay sayers actually can be helpful sometimes, those will be some of the same objections you will hear out there working. Might just learn how to answer some of them.

Sounds a little like the Missed Fortune book by Douglas Andrew that I just ordered the other day, and some other Found Money Management stuff I have been reading about.

For Mr. Forgot More Than You Will Ever Know, What does your prospecting consist of? Give me something I can use. I have plenty of mud out by the barn, we had over two inches of rain yesterday.

Before falling in love with Missed Fortune, find someone that knows a thing or two about it, especially Title 26, Section 264(a)3.