Adding More Insurance

or Register to post new content in the forum

 

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Aug 12, 2009 9:23 pm

As I approach two years in production, I am starting to add more insurance into my business. I could use a better understanding of when to use whole life, universal life and VUL.  Wholesaler's seem too eager to push VUL's regardless of age and need.  Can you guy's help me sift out the BS and provide some general direction on what product applies when?

Aug 12, 2009 11:46 pm

Term = insurance for a given period of time.  Variants include annual renewable (ART), 5-30 year terms.  Mostly guaranteed renewable at the end of the term, but at higher rates.  Offers the lowest premium/highest initial death benefit, but no cash value and it is a temporary solution

 
UL/VUL = ART chassis with an investment portion.  UL is a fixed account, VUL is an investment account like mutual funds.  Mid-level premium and DB.  On assumptions, these policies work well.  In real life, they blow up more than they don't.  Guaranteed UL will ensure a guaranteed DB assuming the client never misses a premium payment.
 
WL - guaranteed CSV, guaranteed DB, guaranteed cost of insurance.  Highest premium, lowest initial DB.  If someone wants permanent insurance, is young, and has the means, this winds up being the most cost-effective solution.
 
I'm missing a ton of stuff, but I am tired and I'm not trying to overload you.  When it comes to life insurance, keep it simple.  Lead with term insurance with strong conversion options.  Look for a company that offers a full portfolio of permanent options.  Ask your wholesalers what their company's definition of disability for waiver of premium.  If they hesitate with an answer, you should question whether they're the right partner for your practice.  For complex cases (estate planning, business life insurance), consult a local agent or a home office employee with significant experience in these kinds of situations.  If you go it alone in these complex cases, you will f*** up and open yourself up for an E&O claim. 
 
Good luck.
Aug 13, 2009 7:35 am

Thanks deekay. I appreciate the time. You touched on my concern about the VUL policies. Is there a time when they are appropriate?  I have a case now, where a 65 year old male has a Time Life UL policy that will lapse at 76.  It's a small policy...25k. Basically for final expenses. He has no debt, kids are fine but still is way underinsured.  Hartford keeps pushing a VUL using an 8% illustration and lapsing at age 126.  It took his monthly payment from $35 to $25. He has a cash value of $6,500 in the current policy.  Can this work for him or will I be risking having this same conversation with him when he's 86 and has no other options but to let it lapse or cough up 5k a year?  

Aug 13, 2009 7:51 am
TheBigE:

Thanks deekay. I appreciate the time. You touched on my concern about the VUL policies. Is there a time when they are appropriate?  I have a case now, where a 65 year old male has a Time Life UL policy that will lapse at 76.  It's a small policy...25k. Basically for final expenses. He has no debt, kids are fine but still is way underinsured.  Hartford keeps pushing a VUL using an 8% illustration and lapsing at age 126.  It took his monthly payment from $35 to $25. He has a cash value of $6,500 in the current policy.  Can this work for him or will I be risking having this same conversation with him when he's 86 and has no other options but to let it lapse or cough up 5k a year?  

 
All of those situations could happen.  Ask yourself:  What investment has gone up by 8% every single year?  Is there a chance Hartford could raise expenses on their inforce policies?  Can you become agent of record on the Time Life policy, add more monthly premium to the policy, and keep the current policy inforce?
 
When you answer those questions, you'll have your decision for your client.
Aug 13, 2009 9:48 am

TheBigE, I sell lots of insurance.  I have never found a time in which a VUL was in the best interest of the client.  Ok, there was one exception.  It was a single premium case and 100% of the money went to the fixed account option.   Health issues made this the best choice and I never expect this situation to occur again.

 
As for the Hartford VUL, what happens at 0%?  What happens if the next few years are negative?  Your concerns are very justified.  If he's healthy, you'll be able to find a carrier that will GUARANTEE that the policy will stay in force for the rest of his life with a 1035 exchange of the cash along with a premium payment of $25/month or less.
Aug 13, 2009 6:55 pm

Anonymous, I agree with you and have backed off the VUL option.  I don't want to be playing the market with insurance needs.  Lincoln had a good UL with a no lapse option that works a little like term.  Do you have a general insurance strategy that you use for most cases and tweak as the situation calls?  If so, what would that be? Perhaps a permanent/term blend?