you are a scammer if you sell UL and WL

[Newby]

I always get frustrated when I talk to Dave Ramsey listeners who think if you are suggesting anything other than term life you are a scammer.

Don't you know that Dave teaches that all I need Is term life. Yet my heart always brakes when his listeners call in and now they have cancer and their term life policy is about to expire. They call the show crying and Dave still dose not budge.

He also feels that once you are out of debt you will have so much money that you can self insure. At some point in your life you don't even need term.

here is a link to him talking about this issue

YouTube - Dave Ramsey--Term vs Cash Value Life Insurance

So whats the answer?

What can we tell these people? maybe a combination of both UL and term?

I don't have any answers just questions please help.

When people indicate to me they like Dave Ramsey or Suzi Orman, I see it as a good thing.

If they listen to Dave they are constantly told on his radio show daily that they need 10X their income in term life. About half that amount on the wife. Disability protection. Long-Term Care Insurance. Good health insurance. Identity theft protection ...etc.

Dave has focused their attention on these needs. All you have to do is start askeng which ones they have covered and which ones they need to add. What's so hard about that?

Go WITH the flow not against it.

Don't try to sell whole-life to people who are sure (in their own mind) that they will be rich by the time their term-life policy ends. They don't need it. At least they are convinced they don't. But they are convinced they have all these other needs that they DO have.

 

[James]

When people indicate to me they like Dave Ramsey or Suzi Orman, I see it as a good thing.

If they listen to Dave they are constantly told on his radio show daily that they need 10X their income in term life. About half that amount on the wife. Disability protection. Long-Term Care Insurance. Good health insurance. Identity theft protection ...etc.

Dave has focused their attention on these needs. All you have to do is start askeng which ones they have covered and which ones they need to add. What's so hard about that?

Go WITH the flow not against it.

Don't try to sell whole-life to people who are sure (in their own mind) that they will be rich by the time their term-life policy ends. They don't need it. At least they are convinced they don't. But they are convinced they have all these other needs that they DO have.

Well let us look at how you can show the difference, between Ramsey and Suzie O's BTID really works out. Let's keep it simple, say someone has ten grand a year to save and I offer them a 10 grand a year Par WL properly structured with PUA and the DB and it grows to 750 grand at age 65. Okay, he takes his ten grand and instead of investing it in the WL contract goes out and buys into an investment he is calculating will perform at a steady 8%, now if he uses his whole 10 grand in the investment he will in thirty years have $1,324,085.25. So here we are, he has $1,324,085.25 compared to the WL policy of only around $750 assuming a 5%. Now 8% is achieveable with some help over thirty years with moderate risk, as 5% is average for a Par WL.

Now he says I only need term! Let us use a 1 million term contract for thirty years, as in he is 35 and retires at 65 and god only knows no one needs insurance past then! He can easily self insured, this one investment will net him 1.3 million, right? Of course! Mid range cost of all companies comes out to a cheap 1 grand yearly for thirty years or 30 thousand for the life of the policy. Yet though, in WL he wouldn't need the extra term, the ten grand a year policy will be real close to that (as he ages the DB will grow, I'm using PUA)! So my guy doesn't have that cost, so let us look at the "Oppurtunity Cost" of the term policy of 1 grand a year, growing at 5% as in added PUA of the WL contract. So my guy makes an added $74,082.73 and the other guy pays 30 grand! So now we are looking at my guy having $824,--- and your guy subtracts 30 grand and now at $1,28-,---. Still ahead of me are you not. I still have around $450,000 to cover.

I forgot to ask, you're making 8% over thirty years, don't give me no BS and tell me you are using a Tax Free investment. Exactly how do you or Dave want to pay the taxes on your investment? Let us assume just ordinary tax, no capital gains at this point. Our guy is paying 10 grand for an investment, he makes around 110 grand a year and in the 25% tax bracket (?). Would you like to pay it out of pocket or out of the investment? If you say out of the investment, we would have to go back and rerun the numbers, because this will cut more then half of the growth of your investment. If you pay out of pocket, realize that in less then half of the mid point or around 14 years your taxes due will be greater then the actual $10 grand a year contribution to your investment. Either way, the taxation is a serious problem and one that hampers many from saving in the first place. You want to guess what the "Lost Oppurtunity Cost" is on the taxes? In other words this like the term insurance is extra cost, so my guy gets this money to but instead of spending it or term or taxes he invest the money!

Oh the things Dave is hiding. No sir, I don't think I'll just sit on my Ass while Dave sells his crap. Oh yea, I'm a commission whore becuase I sell WL, yet what kind of commissions does Dave make on his book or the fees on his ELP and Ad's on his show? Only thing Dave and Suzie are doing is raking in the dollars, they don't give a crap about their members. By the way, Suzie is lucky to make 5% on her investments (really!), reality is stranger then fiction with these clowns.

Oh by the way, Dave is a great salesman! If you give the same amount of passion to your product as he does his, you'll do great!

 

[Newby]

Well let us look at how you can show the difference, between Ramsey and Suzie O's BTID really works out. Let's keep it simple, say someone has ten grand a year to save and I offer them a 10 grand a year Par WL properly structured with PUA and the DB and it grows to 750 grand at age 65. Okay, he takes his ten grand and instead of investing it in the WL contract goes out and buys into an investment he is calculating will perform at a steady 8%, now if he uses his whole 10 grand in the investment he will in thirty years have $1,324,085.25. So here we are, he has $1,324,085.25 compared to the WL policy of only around $750 assuming a 5%. Now 8% is achieveable with some help over thirty years with moderate risk, as 5% is average for a Par WL.

Now he says I only need term! Let us use a 1 million term contract for thirty years, as in he is 35 and retires at 65 and god only knows no one needs insurance past then! He can easily self insured, this one investment will net him 1.3 million, right? Of course! Mid range cost of all companies comes out to a cheap 1 grand yearly for thirty years or 30 thousand for the life of the policy. Yet though, in WL he wouldn't need the extra term, the ten grand a year policy will be real close to that (as he ages the DB will grow, I'm using PUA)! So my guy doesn't have that cost, so let us look at the "Oppurtunity Cost" of the term policy of 1 grand a year, growing at 5% as in added PUA of the WL contract. So my guy makes an added $74,082.73 and the other guy pays 30 grand! So now we are looking at my guy having $824,--- and your guy subtracts 30 grand and now at $1,28-,---. Still ahead of me are you not. I still have around $450,000 to cover.

I forgot to ask, you're making 8% over thirty years, don't give me no BS and tell me you are using a Tax Free investment. Exactly how do you or Dave want to pay the taxes on your investment? Let us assume just ordinary tax, no capital gains at this point. Our guy is paying 10 grand for an investment, he makes around 110 grand a year and in the 25% tax bracket (?). Would you like to pay it out of pocket or out of the investment? If you say out of the investment, we would have to go back and rerun the numbers, because this will cut more then half of the growth of your investment. If you pay out of pocket, realize that in less then half of the mid point or around 14 years your taxes due will be greater then the actual $10 grand a year contribution to your investment. Either way, the taxation is a serious problem and one that hampers many from saving in the first place. You want to guess what the "Lost Oppurtunity Cost" is on the taxes? In other words this like the term insurance is extra cost, so my guy gets this money to but instead of spending it or term or taxes he invest the money!

Oh the things Dave is hiding. No sir, I don't think I'll just sit on my Ass while Dave sells his crap. Oh yea, I'm a commission whore becuase I sell WL, yet what kind of commissions does Dave make on his book or the fees on his ELP and Ad's on his show? Only thing Dave and Suzie are doing is raking in the dollars, they don't give a crap about their members. By the way, Suzie is lucky to make 5% on her investments (really!), reality is stranger then fiction with these clowns.

Oh by the way, Dave is a great salesman! If you give the same amount of passion to your product as he does his, you'll do great!

I'm not saying you're wrong. What I'm saying is...Dave has created a need in this prospect's mind for certain types of coverage. It's simple to fill those needs and their "advisor" has already told them to buy them. You can go with the flow and make great sales. Why try to educate them and go up against a brick wall. They don't understand why they don't want whole-life...they just know a guy they trust told them it's not what they want.

So sell them what they want. It's easy to beat Zander Insurance quotes on term. It's easy to quote them disabbility, LTC and health if they need it. Why not just do that, make the sale and go on to the next one?

 

[James]

I'm not saying you're wrong. What I'm saying is...Dave has created a need in this prospect's mind for certain types of coverage. It's simple to fill those needs and their "advisor" has already told them to buy them. You can go with the flow and make great sales. Why try to educate them and go up against a brick wall. They don't understand why they don't want whole-life...they just know a guy they trust told them it's not what they want.

So sell them what they want. It's easy to beat Zander Insurance quotes on term. It's easy to quote them disabbility, LTC and health if they need it. Why not just do that, make the sale and go on to the next one?

What you are saying is "Go along to get Along", I understand what you are saying, "Path of Least Resistence". To some degree I agree with ya.

There is always that proverbial "BUT", the person that is willing to buy into BTID is not IMHO a good candidate for DI or LTCi. Insurance is insurance, if they seek out the cheapest insurance possible as in term I don't know how I could sell them a solid DI policy?

Ps, there is another thread about LTCi and a NYL agent quoting cheap LTC premiums. Some wonder how, someone came up with the idea of 365 day elimination period (god only knows NYL isn't known for low prices), good that probably is happening. Yet, knowing NYL agents and their mindset on WL, a 365 day elimination period may very well be a perfect fit. WL has a lot of uses, as in using the CV for self funding LTCi or DI partially and saving quite a bit of money when used correctly.

 

[bluemarlin08]

James,
Didn't know you use LEAP, the lost opportunity cost sorta "leaped" out.
Why would you assume ordinary income tax on the investment?

 

[LGilmore]

James, while I don't disagree with your pov, newbie's point is valid too. It is far easier to educate a client, than a customer. You have a client, you hope to make a customer a client. I totally understand what newbie's saying... if you point out how dumb the customer is being at the mommment, you win the battle, but lose the commission in most cases... however, if you make that person a client, and convert them later.. you've won the war.

I used to feel the same way and do the same stuff, till a senior agent simply pointed out if a customer wants to pay you twice, don't fight it, make them a customer first.

 

[James]

James,
Didn't know you use LEAP, the lost opportunity cost sorta "leaped" out.
Why would you assume ordinary income tax on the investment?

No I don't use LEAP even though it is a great program. Yet, the term "Lost Opportunity" comes from the BTID crowd as much as it does come from the LEAPER's. The tax issue, I'm using a taxable investment, I'm not discussing at least in this point the Qualified Vs CV Insurance issue. The Roth is great and should be funded, can you tell me exactly how much someone making $110 grand can contribute?

 

[James]

James, while I don't disagree with your pov, newbie's point is valid too. It is far easier to educate a client, than a customer. You have a client, you hope to make a customer a client. I totally understand what newbie's saying... if you point out how dumb the customer is being at the mommment, you win the battle, but lose the commission in most cases... however, if you make that person a client, and convert them later.. you've won the war.

I used to feel the same way and do the same stuff, till a senior agent simply pointed out if a customer wants to pay you twice, don't fight it, make them a customer first.

I totally understand, just on a warpath of these bozoos, Dave and Susie O.. To tell you the truth though, I don't run into this crowd all that much, Dave Ramsey's following is not as big as some would suggest, IMHO.

Usually, if people are thinking they'll see what I'm saying or at least give me a chance to demostrate it. I'll sell someone term, it is never really all or nothing.

 

[James]

The shifting sands of discussion that we must contend with. First we view the real cost of Dave Ramsey's advice. That was not good enough, never is. The next thing to come is the Qualified discussion, not like the BTID crowd is gonna think they will loose that one! Now where and who decides on Qualified Savings rules? Well of course DC and politicians, the same that have decided to tax savings in the first place! Gee, what a genious move that was.

So they gave us such things as IRA and 401's, gee your tax liability will be less when you are older! Yea, sure it is a natural occuring event, government always reduce tax rates. Yea, once every twenty years only after raising them for those twenty!

Then came the Roth Account, much better and people are moving as quick as they can over to them. Yet, this is a problem. This year I do believe the limit is $5,000 or $6,000 if over 50, once again seniors (or the new class of citizen "Near Senior", oh that is me, almost!) are special people! Now if you are single you can make up to $99,000, if married $156,000 before you are quickly phase out of the Roth and can not contribute a penny. Gee DC, thanks that was so generous of you!

Now is there more Non Taxable investments, sure but once again which ones are paying 8% plus over thirty years?

 

[bluemarlin08]

I wasn't referring to TQ investing, rather assume that the investments are taxed in 35 years at CG rates. Using your figures that would be 1,324,084 less basis of 350,000 CG tax would be around 150,000 for a net amount of 1,174,084. Compared to the WL 750,000 CV less cost of 350,000 balance taxed at ordinary income rates (100,000) for net value of 650,000. If comparing accumulation values WL only wins if one becomes disabled.