Why Term over Final Expense?

[WinoBlues]

I believe there is a gigantic market, currently almost totally ignored, for selling 20 year term to 60-year-olds (for example) to mitigate the loss of Social Security income if one spouse dies early in retirement.

Obviously it has to be explained properly and accurately, but that is a potential multi-billion-dollar market that is going begging at present, as far as I can tell.

Are you talking ROPTerm or a Protective Classic type term or regular term? If regular term what happens at age 81?

 

[steve heller]

Are you talking ROPTerm or a Protective Classic type term or regular term? If regular term what happens at age 81?

Regular term.

What happens at 81 is that if the insured has survived to that age, then his or her Social Security payment has been made until that age. This means that the event being insured against, namely the severe drop in Social Security income when one spouse dies, has not happened. This means that the insurance has served its purpose.

 

[VolAgent]

Regular term.

What happens at 81 is that if the insured has survived to that age, then his or her Social Security payment has been made until that age. This means that the event being insured against, namely the severe drop in Social Security income when one spouse dies, has not happened. This means that the insurance has served its purpose.

So a widow receives both her check and her husband's as long as he was 81 when he passed? Or a widower as the case may be.

 

[steve heller]

So a widow receives both her check and her husband's as long as he was 81 when he passed? Or a widower as the case may be.

No, that's not the case. But the insurance is still valuable.

Let's look at an example, assuming that the proposed insured is the husband. Obviously this can be extended to insuring both, but let's keep it simple.

Assume that both spouses are the same age, and that each spouse has a $2000/month SS payment starting at age 62, and that there is no inflation.

Situation 1: no insurance on husband

1. If both spouses live until 81, then they have received $4000/month for the previous 18 years, for a total of $864,000.
2. If the husband dies before age 62, which is the worst case scenario, then his widow receives only half of that amount, or $432,000, for a total loss in income of $432,000.

Situation 2: $250,000 of 20-year term insurance on the husband, who is in a standard rating class at age 60. His premium should be somewhere around $3000 a year, or a maximum of $60,000 for 20 years.

1. If both spouses live until 81, then they have received $4000/month for the previous 18 years, for a total of $864,000, less $60,000 for insurance, or a net of $804,000.
2. If the husband before age 81 (while the insurance is in force), then his widow receives only half of that amount, or $432,000, for a total loss in income of $432,000. Now the worst case is that the husband dies immediately before starting Social Security payments, so that the widow receives the $250,000 insurance payment (tax-free), less the $6,000 paid in premiums for the first two years of the policy, for a net income over the period of $676,000.

Of course we don't know when the husband will die, but the entire point of life insurance is to mitigate the loss of income when someone dies, and this does that very effectively.

Which position would you rather be in as a widow?

 

[WinoBlues]

No, that's not the case. But the insurance is still valuable.

Let's look at an example, assuming that the proposed insured is the husband. Obviously this can be extended to insuring both, but let's keep it simple.

Assume that both spouses are the same age, and that each spouse has a $2000/month SS payment starting at age 62, and that there is no inflation.

Situation 1: no insurance on husband

1. If both spouses live until 81, then they have received $4000/month for the previous 18 years, for a total of $864,000.
2. If the husband dies before age 62, which is the worst case scenario, then his widow receives only half of that amount, or $432,000, for a total loss in income of $432,000.

Situation 2: $250,000 of 20-year term insurance on the husband, who is in a standard rating class at age 60. His premium should be somewhere around $3000 a year, or a maximum of $60,000 for 20 years.

1. If both spouses live until 81, then they have received $4000/month for the previous 18 years, for a total of $864,000, less $60,000 for insurance, or a net of $804,000.
2. If the husband before age 81 (while the insurance is in force), then his widow receives only half of that amount, or $432,000, for a total loss in income of $432,000. Now the worst case is that the husband dies immediately before starting Social Security payments, so that the widow receives the $250,000 insurance payment (tax-free), less the $6,000 paid in premiums for the first two years of the policy, for a net income over the period of $676,000.

Of course we don't know when the husband will die, but the entire point of life insurance is to mitigate the loss of income when someone dies, and this does that very effectively.

Which position would you rather be in as a widow?

 

[VolAgent]

You miss my point. She is still going to suffer a loss in income if he dies at age 82 after the term has expired.

 

[WinoBlues]

No, that's not the case. But the insurance is still valuable.

Let's look at an example, assuming that the proposed insured is the husband. Obviously this can be extended to insuring both, but let's keep it simple.

Assume that both spouses are the same age, and that each spouse has a $2000/month SS payment starting at age 62, and that there is no inflation.

Situation 1: no insurance on husband

1. If both spouses live until 81, then they have received $4000/month for the previous 18 years, for a total of $864,000.
2. If the husband dies before age 62, which is the worst case scenario, then his widow receives only half of that amount, or $432,000, for a total loss in income of $432,000.

Situation 2: $250,000 of 20-year term insurance on the husband, who is in a standard rating class at age 60. His premium should be somewhere around $3000 a year, or a maximum of $60,000 for 20 years.

1. If both spouses live until 81, then they have received $4000/month for the previous 18 years, for a total of $864,000, less $60,000 for insurance, or a net of $804,000.
2. If the husband before age 81 (while the insurance is in force), then his widow receives only half of that amount, or $432,000, for a total loss in income of $432,000. Now the worst case is that the husband dies immediately before starting Social Security payments, so that the widow receives the $250,000 insurance payment (tax-free), less the $6,000 paid in premiums for the first two years of the policy, for a net income over the period of $676,000.

Of course we don't know when the husband will die, but the entire point of life insurance is to mitigate the loss of income when someone dies, and this does that very effectively.

Which position would you rather be in as a widow?

Situation 3 - Husband dies close to mortality at age 81, No Insurance,.Wife lives to 91

I am not arguing the need. I have placed business for this need as well as other income loss needs such as Pension Max.

 

[VolAgent]

Situation 3 - Husband dies close to mortality at age 81, No Insurance,.Wife lives to 91

Interesting, only gave me the bottom portion of what you wrote to quote...

Exactly my point. Nothing wrong with Pension Max, but it isn't the cure all it was promoted as. This is just another variation on Pension Max.

Also, if we are poking holes in it, you can be sure savvy prospects will have the same questions.

 

[WinoBlues]

Interesting, only gave me the bottom portion of what you wrote to quote...

Exactly my point. Nothing wrong with Pension Max, but it isn't the cure all it was promoted as. This is just another variation on Pension Max.

Also, if we are poking holes in it, you can be sure savvy prospects will have the same questions.

Yup! I have a client's wife I am working with right now. Pension Max. 10 years ago we Laddered two term plans instead of the term/permanent plans I suggested. I needed to email them the original illustrations and Emails as a reminder.

BTW, did I sell them the term? Yes, Yes I did. Almost $600mo premium. I have the signed illustrations to prove it. Document, document, document

 

[VolAgent]

Yup! I have a client's wife I am working with right now. Pension Max. 10 years ago we Laddered two term plans instead of the term/permanent plans I suggested. I needed to email them the original illustrations and Emails as a reminder.

BTW, did I sell them the term? Yes, Yes I did. Almost $600mo premium. I have the signed illustrations to prove it. Document, document, document

Didn't you tell her he was supposed to have died by now?

Betting on mortality is a dangerous game. People have a way of not dying when you plan on.