Selling Life Insurance...

[James]

I like this approach James. I'll have to buy Nash's book
The issues you hit on are exactly the topics I've thought about. Going into a household and conducting a complete money makeover.

I'm curious, when you incorporate IBC, is you goal to sell them a life insurance policy and get them sold on IBC by looking at their health, auto, home, etc. etc.??

I really don't like working with nothing to show for it! Yet, even if they don't buy into IBC, I find having the discussion and going thru the steps such as the Mortgage Maximizer (I like that name!) and, a complete financial review they buy a policy, usually a WL/Term Blend or a UL, that even if they don't buy into IBC concept! Rarely when I do this do I not make a sale, in fact the one I'm having trouble with now has more to do with underwriting then anything else. For me its a win/win, either I get a much larger sale or a normal sale.

Al,

IBC is Infinite Banking System by Nash, you can find it here;

Becoming Your Own Banker. The Infinite Banking Concept. R Nelson Nash.

 

[James]

Really the great selling point is implementing the idea of "Circle of Wealth" or COW. I'm thinking I'll sooner or later have to bite the bullet and purchase it. While I'm confident I'm doing good without it but, listening and seeing the results of using it outside of the ease the results are unquestionably solid.

 

[James]

So some are a bit skeptical of selling CV of WL as something to do with actual money? That is okay, if you feel as though this reason of CV as I put out there in the last few post, here is another excellent reason, just as powerful! In fact it is still what I use along with "Wealth Enhancement".

First off, you sell WL, if you know how WL works you quickly see there are various of ways to load up the money fairly quickly, that is if you can show a meaningful reason why they should. Here a few that should never be overstated. We already agree that DI and LTCi are desireable products but, what is the number one reason people give that they can not sell these products? "Price"!

Okay, so we present the DI;

35 yr old, Illinios Mutual, $5,000 monthly benefit with 30 elimination period, COI to age 65.

If this person is a business owner cost is $2,334.00 annually
If this person is not a business owner cost is $3,408.00 annually

If they can survive one year without benefits the cost to the business owner is $1,500 a saving of $834.00. Non business owner $2118.00 a savings of $1,290.00.

Now let us move to LTCi, which for the same person from John Hancock, Custom Care II.

$150 a day benefit, 5%/5% unlimited benefit period with a 30 day elimination. Cost is $3,299.40, if this person can make it once again a year, the cost would be $2,199.60, a saving of $1,099.80.

So by having a WL contract with Cash in place and, quite secure from market forces we can save the business owner 1,933.00 a non business owner will save $2,389.00 annually!

Now the cost of the Blend WL, 100 grand WL and 900 grand term would cost around 2,000 yearly. So yes, you would have to use the PUA to stuff this full of cash as quickly as possible but, you gave a good reason! The average savings of the other two big policies is around $2,000 annually. Now a blend like this will win you great accolades from FP'ers all over our Nation! In fact some might suggest a larger piece be WL, in fact some companies demand at least 25% of the blend be WL. Now you can set up the blend for the Term drop in the future, may that be 10-15-20 or whenever the PUA builds up to the 1 million of DB.

So the annual running cost is $5,700.00 not counting the insurgency of cash needed under a PUA. This would be the targeted premium, of course we can add a Pay Back on the DI, it would add about 30% to the DI but at age 65 the owner would be given back all premiums paid.

The $5,700 price is a reflection of the Business Owner. A non business owner would pay $6,318.00 annually or about $550 amonth. Now this covers the Big 3, Life, DI and LTCi, all with solid unlimited as unlimited gets in benefits. Of course these numbers could be driven way down, DI to 65 is expensive! LTCi with 5/5% with unlimited benefits is the ultimate in coverage!

 

[bluemarlin08]

James,
Forgive me but I really don't understand the above post, could you elaborate, especially the difference in costs for business owners and non business owners regarding disability. Are you suggesting WL can replace Dis and LTCi? Sorry, am a little slow this morning, not enough caffeine yet.

 

[James]

James,
Forgive me but I really don't understand the above post, could you elaborate, especially the difference in costs for business owners and non business owners regarding disability. Are you suggesting WL can replace Dis and LTCi? Sorry, am a little slow this morning, not enough caffeine yet.

As in Illinios Mutual gives Business owners a healthy discount as they tend to go back to work as soon as possible! Unlike other people this is a trend they have found to be a constant.

No I'm not saying WL can replace DI or LTCi but, the cash value can be use in the first year of the need. Making the premiums more affordable for both products. In fact their is a thread sitting in LTC forum that wonders how NYL agent can offer cheaper premiums, we all know NYL is not known for inexpensive premiums on any product! On the other hand people are asking how can someon afford all three when in fact WL will cost them $5,000 a year, I'm simply putting a plan for that amount that covers all three. All of the policies I used are basically Cadillacs, with unlimited coverage periods by solid companies and the premiums are quite accurate.

Just throwing the different ways one can use WL and the CV within as a selling point. As some suggested, they are adverse to use the selling point as in IBC or Wealth Accumulation. Which is okay, there is a lot of ways the CV of a solid insurance policy can be used.

 

[James]

Okay, the cat is out of the bag, PWL does pay and pays rather well. As in the thread 529 Vs WL, I went and posted MM dividend history for the last 25 years. This year they are crediting 7.45%, yet this does not count the 2% guarantee growth, obviously this is the amount several on this forum has impuned, without understanding the history of dividends with MM. Previous years the interest of dividends went as high as 12.4%. While MM is not the best payor of dividends, it does rank as being one of the best.

Now, to go on here, you have to know how to structure the WL Contract to maximize these numbers. In the last previous post I went into the Insurance Plan, as in the big three, Life, DI and LTCi we can add in Health if we build our policy up significantly as the WL can easily be used as an HSA towards a HDHP. So I present the idea of a Healthy Insurance Plan always starts with a Solid Par. WL contract!

To properly set up a WL contract to accomplished the above, one has to choose the lowest possible DB, with a target premium at the low end and a PUA payment/payments set on max, bumping up against the MEC allowable. Now you can increase the MEC level by using a Blend Product, some carriers will allow this others will not. Remember though, it is up to the Insurance Company, as they are the ones that declare MEC using Government guidelines. IRS rulings are clear, in a blend the DB of the entire face amount including Term part of the blend can be used to define the MEC limits. So if you can do a blend of 100 grand WL and 900 grand Term the MEC qualifing limit is 1 million not 100 grand.

Now understand this, by using the above formula, lowest target premium with largest PUA will effectively reduce your commissions. PUA's tend to pay 1.9% to 3% in commissions while the target premium will pay between 55-75%. Yet, when they send in the cash as PUA, the lion share goes straight into the CV side of the product and increasing the DB. This will also give you a solid life value DB with pure WL and at that point the Term part of the blend should be ended.

So now that we know how to present a PWL policy to a client and, we can now understand the bigger picture we move on and offer them a savings of 2 grand annually on the big 3. Now that savings should also be applied to the overall investment that the WL policy will provide as in guaranteed interest and dividend interest being earned. Now in the example I used with LTCi and DI, the yearly benefit for DI is 60 grand and the LTCi is about 55 grand. So we need to get 60 grand into that policy as quickly as possible!

Okay so let us project, in general terms, if he dumps 60 grand into a PWL that is effectively pays 5% overall with a premium target of around $2,000-$2,500 annually he, at age 70 (the new retirement age for SS for this age bracket I do believe) is right at $500,000. If he earns 7.4 plus the 2% guarantee from MM he'll be close to 1 mill give or take a few grand. Now we take the 2 grand savings and place that in a ROTH earning 7% and we add $317,180.08 to the 0.5-1 million. Either way, he would likely have over 1 million dollars at his disposal at age 70.

Total cost? Let us round the cost of insurance for all three at 6 grand a year for 35 years or $210,000 plus the 60 grand for a total of $270,000. The savings of $317,180.08 more then makes up for the cost of insurance! I'm using what he made off of saving 2 grand a year and the interest as in found oppurtunity. So basically the plan savings paid for everything and leaves him with about a million (if he went with MM or other great Mutuals) to play with at age 70, he can take a few trips to celebrate!

 

[ims01]

true

 

[moonlightandmargaritas]

The whole thread is full of hogwash, and "Voodoo Economics" espoused by folks like the "LEAP" system, etc.

Their idea that whole life is the be all and the end all is based on two things:

1) It's more profitable for the insurance company.
2) Higher comp for the agent (because it's more profitable for the insurance company).

Who is it that said: "when all you've got is a hammer, everything looks like a nail."

 

[James]

The whole thread is full of hogwash, and "Voodoo Economics" espoused by folks like the "LEAP" system, etc.

Their idea that whole life is the be all and the end all is based on two things:

1) It's more profitable for the insurance company.
2) Higher comp for the agent (because it's more profitable for the insurance company).

Who is it that said: "when all you've got is a hammer, everything looks like a nail."

How boarish you are becoming.

 

[moonlightandmargaritas]

How boarish you are becoming.

James, the joke is on you. It's "boorish". You may want to try googling "online dictionary of English".