WOW...Mind Blown: "Term > Permanent"

[Cornelius]

There's a good chance it's a new agent with a company that pushes only term. I would probably just message the person and let them know their compliance department may not like their post and it might be a good idea to remove it.

 

[1963]

The problem insurance faces today is the misinformation perpetuated by credible financial sources as being gospel. Folks like Ms. Ormond and Mr. Ramsey are speaking from a perspective that, while possible, is highly improbable. The factors that would lend to successfully "purchase term, invest the difference" have one flaw: not everyone who gets the difference will be able to invest the difference. Instead, it becomes an answer to a necessary expense in a household budget. If used correctly, term has some valid issues to address. But if the issue is a potentially lifelong event, permanent will always be a better choice in the long run.

 

[DHK]

"Buy term and invest the difference" has two major flaws in its assumptions:

1) It assumes that the prospect has been quoted, can afford, and is considering a complete whole life premium for the given death benefit. Rarely is this the case.

2) The phrase is incomplete because it's really a replacement tactic by investment representatives. The complete phrase is "buy term and invest the difference with me."


Otherwise, it's just "buy term insurance" for length of time you feel you'll need coverage on an affordable basis. We can look at conversion without further medical underwriting later on during our reviews. But the longer you wait, the more expensive the conversion will be for the same permanent death benefit. (So, we'll convert an amount of death benefit that IS affordable based on their age and underwriting class.)

 

[WinoBlues]

No kidding. More people are buying term that should be getting WL, or at the very least GUL, than the other way around. Most of the people listening to the "tv experts" are dumb as shitt.

Inventory.

..........

 

[BYSFG]

Recently spoke with an agent who pushes only term. Apparently there was a segment on "60 minutes" where they addressed big named companies about not paying claims, or something along those lines. Using this segment, this agent's remark to me was,

"Term is better when you look at from a bigger perspective. If you watch that 60 minute episode you'll see why. We're better at paying claims."

You don't say?!!

Granted that was a short lived conversation. Havent seen that segment either. Just thought Id share my experience from today after starting this thread.

Apparently if you look hard enough, these agents are everywhere.

 

[DHK]

"You're better at paying claims?" For a product that is actuarily designed and calculated to NOT be in force when you die?

Let's let that sink in for a bit.

http://www.lifehealthpro.com/2004/07/01/why-didnt-burt-tell-us-to-buy-whole-life?slreturn=1471392224

Invest the Difference
Eat ham without eggs and invest the difference
Have your children quit school at 16 and invest the difference
Get rid of your kids, take in boarders, and invest the difference
Don't dress for success, buy cheap clothes, and invest the difference
Sell your car, buy a moped, and invest the difference
Sell your home, move to the slums, and invest the difference
Stop taking showers, walk in the rain, and invest the difference
Stop reading, ask your friends what's going on, and invest the difference
Don't buy a radio, hum, and invest the difference
Cease planning, ad lib, and invest the difference
Don't vacation, join the Army Reserve, and invest the difference
Give lip service, not real service, and invest the difference
Don't pay taxes, go to jail, and invest the difference
Cancel your permanent insurance and invest the difference...
It makes as much sense

You sell whole life because you make more money

The third call started the ones I really was expecting. I knew I would be hearing from the "termites." This man said in a direct, abrasive tone, "You guys only sell whole life insurance because you make more money." I'm sure most producers have heard that before. I asked him if making more money was a bad thing if the ultimate benefit was to the consumer. He blurted out, "Yes." I told him I had read Professor Brown's book, Harcourt Press, Toronto, $24.95 Canadian dollars. If making more money were bad, why did Professor Brown not have the book produced on the cheapest, lousiest, thinnest paper possible and on page one tell the reader to invest $21.95? In fact, Northern Tissue would have been a good choice. He hung up on me. I also had four of those on that day.

Now they were coming at me. The next guy said that the client always could do better investing himself rather than the insurance company and that I only sold whole life because I made more. I told him in the long run I make more on term. He said that was impossible. I explained that if we made the assumption that the commissions on a permanent policy were 50% and the commissions on a term policy were 50%, ultimately, I would make more on the term. That frustrated him. I gave this example: "Let us assume the client wants $100,000 of protection and the premium for whole life was $1,000 and the premium for term was $100. " At this point he interrupted me, saying, "$500 commission is more than $50 commission." I agreed that his math was right but told him that was not the end of the story for this single policy. The premium for the term was $100 today but would change in the future one way or another, and that is costly for the client. If I wanted to stick to a term-only formula, I would change the policy from time to time when the rates might be better, as we saw in the term wars a few years ago. Then the replacement policy might be cheaper than the published rates in the old policy. If the client replaces, I get paid a new commission again at a new age. If it goes on a few times, I make more.

Another thing can happen. For health or economic reasons in the future, the client may want or need to convert the policy. Then the stupid insurance company pays me a new commission on the same contract, at a much higher amount. Therefore, in the long run, I make more on that kind of term arrangement. I told him I had been in the business a long time and intended to stay a lot longer, so if money were the only criterion, I would agree with him and sell only term. He hung up on me. I had four of those that day, too.

Paying loan interest on borrowed money

They were after me. The next caller said: "You guys always say the cash value is your money. If that is true, why do we have to pay interest on a policy loan or even repay the loan?" I gave this example: "Suppose you had a life insurance policy with $50,000 cash value and borrowed it all out. We agree you would have to pay interest. The policy, however, is now in its 15th year. Statutorily, next year the policy is in its 16th year. Even though you took out the cash value, the insurance company will give you the next year's published gain and any dividend due. From their point of view, the policy has all the elements still in it to make the numbers work. Because some money was taken out, there has to be a replacement to make all the assumptions work. So, although it cost interest, there was an offset or even a gain overall.

"Let us also assume you have a bank account with $50,000 in it. If you withdraw all of it, would the bank pay you interest on the vacated money? Therefore, even though the insurance company is charging you interest, they are offsetting it with gains on money that is not even there."

I further asked him if he made a second mortgage on his home or an equity loan, if he would have to repay it or pay interest. He said yes, and I asked him why because the equity was his money. He hung up, too.

Term is like wetting the bed

Are there holes in whole life? I guess there are; nothing in life is unanimous or all encompassing, and different products do different things. This all springs from the fact-finding, which determines the client's goals. But relying strictly on term is like wetting the bed: nice and warm at first, but eventually one must get up and do something about it. An old automobile commercial said, "Ask the man who owns one." There is great gratification and peace of mind in dealing with completely satisfied clients whose comments are: "I could be a poster boy for your insurance company," or "There is only one thing wrong with this policy. It is too small. I wish I had more like this."

 

[Tothetop]

Great post DHK.

 

[marindependent]

Poor ladies on fixed income with no dependents usually DO want whole-life. They want it to cover their funeral and cemetery expenses.

I have no issues with Final Expense for people that need it. I should have qualified my statement "Poor Old Ladies with Savings, on a Fixed Income, are being sold Whole Life."

 

[Newby]

I have no issues with Final Expense for people that need it. I should have qualified my statement "Poor Old Ladies with Savings, on a Fixed Income, are being sold Whole Life."

What should they be sold?

 

[glgamerica]

Some of the term to 100 I see costs as much as the whole life I sell but it has no cash value.

Some of the people I meet with will only buy term.

It's kind of brilliant marketing to sell a product that costs as much as whole life, has no value and expires to the people who only "hear" the advice buy term and are trying to do the right thing.

My point is that you have to look.at the contracts of the term to 95 you mentioned and go from there.

Not everybody is selling good term contracts.