Studying for License, Have Some Questions

Oct 22, 2015

  1. Spin
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    Spin New Member

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    1) Can a person who is overweight, and/or a smoker and/or has bad credit, apply for a lower premium on their existing policy if they lose weight/stop smoking/improve their credit score?

    2) How do you know when to use the human life value or needs analysis approach when determining a client's life insurance needs?
     
    Spin, Oct 22, 2015
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  2. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    1) Yes. They'd have to just retake the paramed exam to show that they have lost weight/stopped smoking, etc.

    Bad credit doesn't usually factor into buying life insurance. Only if there's an open BK that hasn't been discharged yet. That's primarily because insurance companies want to be sure that they'll be paid on the policy, that's all.

    However, their driving record often comes into play.

    2) This is a selling question. Human Economic Life Value (HELV) is often a multiple of income based on their age. Insurance companies will typically have maximum limits that one can apply for, such as 30x annual income if you're under age 30.

    If they cannot afford that amount of coverage, then the "needs" analysis will determine the MINIMUM amount of coverage they "need".

    The real life answer is this: Sell them the amount of coverage they want at a price they can easily afford... as long as they can medically qualify for it.
     
    DHK, Oct 23, 2015
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  3. TampaHound
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    TampaHound Guru

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    Many companies offer a price break at 250K and 500K as well. So if they need 200K for example it may be to their (and your) benefit to offer them more insurance since the price may be lower. :1cute:

    Sometimes you can sell two policies with two different companies to get the max coverage at the lowest price as well.

    Just a few little tricks you pick up.
     
  4. Spin
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    Spin New Member

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    Thanks guys, I've got a few more.

    What's a non-participating whole life policy?

    When would an indeterminate premium be used?
     
    Spin, Oct 24, 2015
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  5. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    For your first question... there's Google. Investopedia is a great reasource.

    In layman's terms, a non-participating policy is a policy that does not participate via dividends in the company's performance and profitability... as opposed to a participating (par) policy that does.

    For your second question, that may be more of a technical term that isn't used in common agent language today.

    What is indeterminate premium life insurance

    This description reminds me of an "option-ARM" mortgage. In an option-ARM mortgage, you pay "interest only" payments for a period of time, until that time expires. Then you can either refinance it, or owe a balloon payment, or pay a higher rate... whatever it is according to the contract.

    BTW, while the definition says you could pay a "lower rate"... never believe that. You are 5 years closer to your life expectancy and insurance companies know this. You'll pay more. TANSTAAFL - There Ain't No Such Thing As A Free Lunch.

    Your question was "When would an indeterminate rate be used?"

    My answer: I wouldn't. Why? Human nature and it's just not going to be a good situation for the client long-term. If a client cannot afford a level premium payment for permanent life insurance for a long-term duration... don't sell them a permanent life plan. Either blend a policy between term & permanent, or just sell term.

    Just my opinion.

    If anyone else has sold such a plan, I'd love to see your reasoning why.
     
    DHK, Oct 24, 2015
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  6. HomeService
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    HomeService Guru

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    One thing I did was actually go to the library and read actual books on insurance, written like in the 1930's or 40's or something, to learn about "old school insurance concepts", from days gone by, it helped me realize concepts and product forms and uses of said products. You could probably now find this stuff online somewhere.
     
  7. DHK
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    DHK "YOU CAN'T HANDLE THE TRUTH!"

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    The more I'm thinking about this Indeterminate Premium life Insurance... is more like Universal Life being sold in the 80's.

    It was sold as "whole life at half the price". It wasn't true. It set up these policies for failure because of the high interest rate environment at the time as well as lower funding requirements.

    Then policyholders got premium (Cost of Insurance) increase notices and they realized that they couldn't (or didn't want to) continue the premiums because the policy was misrepresented and the agent may not have been in the business to review the policy on a regular basis.
     
    DHK, Oct 24, 2015
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