Case Help With Insurance & Annuities

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Dec 17, 2008 7:10 pm

Let's assume there is a husband and wife, Robert and Nancy. Robert is around age 58 and <?: prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Nancy is about 55. He owns a business where she works there to help out, however Robert has a bad heart condition and is probably only expected to live for another 10 years or so. Robert and Nancy are both relatively conservative and they assume that Robert will not be able to qualify for life insurance (they haven't checked yet, but even if they do, they think the premiums will be off the walls). He is worth about $3 million and has about $800k in liquid cash. The primary objective isn’t about preserving income to last him and his wife through retirement (considering he only has about 10 more years to live). However, he does want to leave as much income to his wife as possible.<?: prefix = o ns = "urn:schemas-microsoft-com:office:office" />


 
I don’t really know life insurance all that well, but I still think buying a policy no matter how expensive it is, is better than the option they’re looking at. They both want to buy a variable annuity with a withdraw for life benefit (joint life) and add some sort of enhanced death benefit rider on there. I personally don't think mixing living benefits with death benefits inside a variable annuity. Even if they were to buy a death benefit rider by itself, wouldn’t the life insurance policy still preserve more income?
Dec 17, 2008 7:17 pm

He needs to go through the life underwriting process. Until he does, it's all just conjecture and guesses.

Dec 17, 2008 8:31 pm
YHWY:

He needs to go through the life underwriting process. Until he does, it's all just conjecture and guesses.

 
Well put.  All financial decisions for all clients ultimately depend on whether or not they are insurable.  In this senario, I would be suprised if you couldn't find a company to take the case.  Sure, affordability will play a large part of this but if you work with a mentor who knows how to deal with these kinds of cases, you'll get something done.
 
Let me restate this:  this is a case you do not want to work on yourself.  Bring a mentor in, split the case, and do everything the mentor says.  Do not question, do not try to negotiate the split, nothing.  You don't know what you are doing and if you can't find someone to work with on this, you will fuck it up.
Dec 17, 2008 9:28 pm

Why should we help a jerk like you who has been so critical of those who sell annuities? 

Dec 17, 2008 11:26 pm
deekay:
YHWY:

He needs to go through the life underwriting process. Until he does, it's all just conjecture and guesses.

 
Well put.  All financial decisions for all clients ultimately depend on whether or not they are insurable.  In this senario, I would be suprised if you couldn't find a company to take the case.  Sure, affordability will play a large part of this but if you work with a mentor who knows how to deal with these kinds of cases, you'll get something done.
 
Let me restate this:  this is a case you do not want to work on yourself.  Bring a mentor in, split the case, and do everything the mentor says.  Do not question, do not try to negotiate the split, nothing.  You don't know what you are doing and if you can't find someone to work with on this, you will fuck it up.
 
Hey Deekay,
 
For the record, I'm not yet a producer so this case that I brought up wasn't a real life scenario. This is actually just something that my CFP instructor brought up in class to challenge us outside of the academic book reading. If it were a real case scenario, I would like to think I care more about my clients than to randomly put them in products. Thank you though.
Dec 17, 2008 11:31 pm
Hank Moody:

Why should we help a jerk like you who has been so critical of those who sell annuities? 

 
I was not critical of brokers who do sell annuities, I was trying to bring up some concrete facts in order to get a response as to WHY brokers sell them. However, I made the mistake of generalizing all VAs into thinking that everyone puts their client into 3%+ fee annuities. Useful board members such as Anonymous has actually made me realize the benefits of a GMAB rider where can go "all in" for a low 2% fee.
 
Anyways, my previous posts were never meant to directly target anyone, but only a specific product. This is not to say that I do not believe in the product because I do, in fact come January/February when I'm thrown out into the field, I will sell VAs myself.
Dec 17, 2008 11:36 pm
ChrisVarick:

For the record, I'm not yet a producer so this case that I brought up wasn't a real life scenario. This is actually just something that my CFP instructor brought up in class to challenge us outside of the academic book reading.

 
Why are you taking CFP classes before you are a producer?
 
Also, the little amount of information you have makes you very dangerous.  Thank god you're not an advisor.
Dec 18, 2008 6:08 am

With anything that might involve life insurance, it is a waste to get your brain involved until after an application has been taken.  Decisions can't be made on quotes. 

Dec 18, 2008 8:17 am
ChrisVarick:
Hank Moody:

Why should we help a jerk like you who has been so critical of those who sell annuities? 

 
I was not critical of brokers who do sell annuities, I was trying to bring up some concrete facts in order to get a response as to WHY brokers sell them. However, I made the mistake of generalizing all VAs into thinking that everyone puts their client into 3%+ fee annuities. Useful board members such as Anonymous has actually made me realize the benefits of a GMAB rider where can go "all in" for a low 2% fee.
 
Anyways, my previous posts were never meant to directly target anyone, but only a specific product. This is not to say that I do not believe in the product because I do, in fact come January/February when I'm thrown out into the field, I will sell VAs myself.



You're not a broker. How would you know WHY we do anything? Because your loser cfp instructor told you so?

Dec 18, 2008 10:43 am

split the annuity.  Having living benefits with a nice death benefit will put the cost over 3%.  Find the best GMIB/GMWB you can, and find the longest compounding death benefit available.  

Dec 19, 2008 10:34 am

agreed with 2nd post - got to take him through underwriting to see.  you never know?  also - rated policies cost more (of course), but permanent policy ratings percentage wise are far less than term (ie term a rating can double the amount, permanent may only increase it 25%). 

 
with that much liquid cash he can afford to invest in a permenant policy - ours made 7.5% interest this year!  either way they will come out on top - it is a good way to diversify his portfolio and if he lives, the policy will grow (both the cash value and the death benefit), and when he dies (whether that is sooner or later) his wife will get the full death benefit income tax free.
Dec 19, 2008 10:36 am

fyi - i realize (and you should to) that when anyone says that insurance "made xx%" this year that is before insurance, mortality, and application expenses are taken out.  For instance, overall our policies have "made 7.5%" over the last 100 years but the average rate of return if you had a policy for 35 years would be around 6.6% (because of the expenses) - still really good though!

Dec 19, 2008 2:45 pm
silverstang281:

fyi - i realize (and you should to) that when anyone says that insurance "made xx%" this year that is before insurance, mortality, and application expenses are taken out.  For instance, overall our policies have "made 7.5%" over the last 100 years but the average rate of return if you had a policy for 35 years would be around 6.6% (because of the expenses) - still really good though!




Add back the broker's quarterly gouge and taxes and you get the equivalent of the S&P 500, with zero risk to principal. Hmmmmmm..........