Insurance?

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Jul 11, 2007 10:47 am

I recently started with an insurance company  under the premise I will be able to do mainly investment side work. As expected they began encouraging me to dabble in life insurance. I never have liked the stigma associated with life insurance and really don't know If I feel comfy selling it. According to this company's "LEAP" financial planning model, it is best to sell somebody the maximum amount of life insurance. This is because of the protection offered as well as being able to spend the death benefit while still alive. This is possible because "noone understands life insurance". I have been very skeptical, and feel as if the management team usually snakes around my direct questions. I am green in the business, so please answer me this. Should life insurance be the center of a persons financial life. I know it should be a part of it, but the maximum amount? Any praise or criticism of life insurance will be helpful. 

Jul 11, 2007 10:56 am

Told you so.

Jul 11, 2007 11:01 am

I don't know if it is "the center of a persons financial life", but it is very important.  When this subject doesn't get its proper due, clients get hurt.


For someone young and healthy, life insurance can be so inexpensive.  It doesn't make much sense not to get as much coverage as possible.  This is especially true if their wants will increase in the future. 


Clients should have the proper amount of life insurance before they do any investing.  Your clients just need to be able to sign a check if they want to invest.  On the other hand, once a client's health changes, that's it for their insurance...at least at reasonable rates.


Clients also shouldn't invest before they have adequate health insurance and disability insurance.

Jul 11, 2007 5:05 pm

I recently joined a firm that practices LEAP.  I can tell you I was skeptical at first, but it really does a great job of coordinating all of a clients assets, regardless whether you manage them or not. 


Yes, one of the tennants is maximum coverage (not just life) with minimal cost.  IMO, this makes alot of sense.  You insure your house and car for the full replacement.  Well, why don't you insure your life and income for full replacement as well?  Seems to me that you and your client are ALOT more valuable than a car or home from a pure economic perspective.  Don't worry though - LEAP supports investing as well.  However, don't expect it to help you get millions of AUM with it. LEAP shows why a client's "invest first, insure later" position does not make sense financially.


I'm curious though, you state you have never liked the 'stigma' associated with life insurance and you really don't know if you feel 'comfy' selling it.  If you felt that way, why did you join an insurance firm?  Also, what are these stigmas you speak of? 

Jul 11, 2007 8:58 pm

WTF is LEAP...well other than an option lol

Jul 11, 2007 9:13 pm
Closer:

I recently started with an insurance company  under the premise I will be able to do mainly investment side work. As expected they began encouraging me to dabble in life insurance. I never have liked the stigma associated with life insurance and really don't know If I feel comfy selling it. 



Yep that makes sense.  I know that if I didn't feel "comfy" selling life insurance I'd be sure to hire on at a life insurance company.


Beam me up, Scotty.

Jul 11, 2007 10:07 pm
Jul 11, 2007 10:10 pm
Jul 12, 2007 8:41 am
joedabrkr:
Closer:

I recently started with an insurance
company  under the premise I will be able to do mainly investment
side work. As expected they began encouraging me to dabble in life
insurance. I never have liked the stigma associated with life insurance
and really don't know If I feel comfy selling it. According to this
company's "LEAP" financial planning model, it is best to sell somebody
the maximum amount of life insurance. This is because of the protection
offered as well as being able to spend the death benefit while still alive.
This is possible because "noone understands life insurance". I have been
very skeptical, and feel as if the management team usually snakes
around my direct questions. I am green in the business, so please
answer me this. Should life insurance be the center of a persons
financial life. I know it should be a part of it, but the maximum
amount? Any praise or criticism of life insurance will be
helpful. 




How does one "spend the death benefit while still alive"?

Borrowing out one's own money from cash value?  That's an expensive way to accumulate wealth.
Viatical
settlement? Accelerated Death Benefit?  Generally you have to be
of declining health or terminally ill to make that work.





Joe, Don't say that in range of the client!!!!!
If they knew that only way to benefit from Life insurance was to die
sooner than expected, there would be only a small market for it. That
market would be mostly straight protection as found in level premium
term life.



Insurance companies have been trying to promote life insurance as an
"asset accumulation" vehicle forever. But it just doesn't work. The
costs of insurance and internal expenses cause life insurance (and
VA's) to be dominated by straight investments for the purpose of wealth
accumulation.



It's always possible to come up with great projections, but if life insurance was such a great investment you wouldn't have to go through such antics. It would be immediately obvious.



You would see many life insurance millionaires left and right, and they would be alive to tell about it.







Life insurance == Very profitable for insurco, and do you really need extra quaters when the game is over?

Jul 12, 2007 9:26 am
Closer:

I recently started with an insurance company  under the premise I will be able to do mainly investment side work. As expected they began encouraging me to dabble in life insurance. I never have liked the stigma associated with life insurance and really don't know If I feel comfy selling it. According to this company's "LEAP" financial planning model, it is best to sell somebody the maximum amount of life insurance. This is because of the protection offered as well as being able to spend the death benefit while still alive. This is possible because "noone understands life insurance". I have been very skeptical, and feel as if the management team usually snakes around my direct questions. I am green in the business, so please answer me this. Should life insurance be the center of a persons financial life. I know it should be a part of it, but the maximum amount? Any praise or criticism of life insurance will be helpful. 


You joined a life insurance company to do investments????  And now you wonder why they are asking you to sell life insurance????


LEAP = Lifetime Economic Acceleration Process.


www.leapsystems.com


Jul 12, 2007 10:03 am

Closer,


Ignore Allreit on this subject.  A little bit of knowledge is very dangerous.


Allreit, you are the only one talking about life insurance being an investment.  You don't have to die sooner than expected to benefit from life insurance.  The only one's who don't benefit from life insurance are those who cancel their policies.


Whole life insurance is a phenomenal asset that most people who are not financially struggling should own.  It is not an investment.


Borrowing money from the policy is a great way to get to cash when cash is needed.  Ex. Client has $500,000 of cash in their policy and $2,000,000 of mutual funds.  The market takes a hit and now the client only has $1,500,000 in mutual funds.  Client needs $50,000.  The life insurance allows the client to not touch their investments when the market is down.

Jul 12, 2007 11:51 am
anonymous:

Closer,


Ignore Allreit on this subject.  A little bit of knowledge is very dangerous.


Allreit, you are the only one talking about life insurance being an
investment.  You don't have to die sooner than expected to benefit
from life insurance.  The only one's who don't benefit from life
insurance are those who cancel their policies.


Whole life insurance is a phenomenal asset that most people who are
not financially struggling should own.  It is not an investment.


Borrowing money from the policy is a great way to get to cash when
cash is needed.  Ex. Client has $500,000 of cash in their policy
and $2,000,000 of mutual funds.  The market takes a hit and now
the client only has $1,500,000 in mutual funds.  Client needs
$50,000.  The life insurance allows the client to not touch their
investments when the market is down.





With a margin account/secured line, they can tap that same $50,000 off of the securities portfolio. Upon death, the securities get stepped up in tax basis, and the tax-free value of the DB is preserved.



As insurance against premature death, I think there is nothing quite
like life insurance. But any time life insurance gets confused with
investments, there alot of room for damage.



That said, pretty much everyone with a family needs life insurance, and
a combo stack of whole + term is usually the best way to go about it.



There's a "hump" period between 35-65 when its most needed, and a good term policy is usually the best cover.

Jul 12, 2007 12:27 pm

But any time life insurance gets confused with investments, there alot of room for damage.


That said, pretty much everyone with a family needs life insurance, and a combo stack of whole + term is usually the best way to go about it.


We're in complete agreement. 

Jul 12, 2007 2:46 pm

[/quote]


You joined a life insurance company to do investments????  And now you wonder why they are asking you to sell life insurance????


[/quote]



Jul 12, 2007 6:00 pm
AllREIT:
anonymous:

Closer,


Ignore Allreit on this subject.  A little bit of knowledge is very dangerous.


Allreit, you are the only one talking about life insurance being an investment.  You don't have to die sooner than expected to benefit from life insurance.  The only one's who don't benefit from life insurance are those who cancel their policies.


Whole life insurance is a phenomenal asset that most people who are not financially struggling should own.  It is not an investment.


Borrowing money from the policy is a great way to get to cash when cash is needed.  Ex. Client has $500,000 of cash in their policy and $2,000,000 of mutual funds.  The market takes a hit and now the client only has $1,500,000 in mutual funds.  Client needs $50,000.  The life insurance allows the client to not touch their investments when the market is down.




With a margin account/secured line, they can tap that same $50,000 off of the securities portfolio. Upon death, the securities get stepped up in tax basis, and the tax-free value of the DB is preserved.


Hmmm....ok, put more risk on something they're already taking a risk on.  And, make it more esoteric.  Super.  I don't disagree with your logic, I disagree with the method.  Little known fact - do you know the story of how Walt Disney created Disney Land?  When all the banks in the area wouldn't give him a loan, he took the money from his WL portfolio.  Care to calculate his ROR on that one, AllReit?

As insurance against premature death, I think there is nothing quite like life insurance. But any time life insurance gets confused with investments, there alot of room for damage.


I couldn't agree more.  Investments are poor insurance.  Insurance is a poor investment.  However, coordinated properly, they work significantly better than they do individually.  And I'm talking WL - term insurance is the biggest moneymaker for insurance companies (i.e. bad for holders).

That said, pretty much everyone with a family needs life insurance, and a combo stack of whole + term is usually the best way to go about it.


Well, technically nobody NEEDS life insurance.  Families WANT to buy life insurance to protect their human economic value.  It is a great estate planning tool, along with trusts and the like.  It is the only savings vehicle that will self-complete in case of disability.  It can provide a competitive savings rate that's tax-free, creditor-protected, and free of market risk, among other benefits.  Can you see why I think WL is a great tool as part of a financial plan? 

There's a "hump" period between 35-65 when its most needed, and a good term policy is usually the best cover.


Again, I agree with you.  However, I've encountered alot of 65+ people who would buy life insurance today if they could, for various reasons (new house, estate planning issues, etc.).  Unfortunately, insurability is a very fragile thing.  Maintaining WL as part of your plan, even at a young age, can do wonders for your future (and I'm not talking about rates of return).  Of course, affordability becomes an issue, and that's where term can make up the difference.


Jul 15, 2007 8:40 am
AllREIT:
joedabrkr:
Closer:

I recently started with an insurance company  under the premise I will be able to do mainly investment side work. As expected they began encouraging me to dabble in life insurance. I never have liked the stigma associated with life insurance and really don't know If I feel comfy selling it. According to this company's "LEAP" financial planning model, it is best to sell somebody the maximum amount of life insurance. This is because of the protection offered as well as being able to spend the death benefit while still alive. This is possible because "noone understands life insurance". I have been very skeptical, and feel as if the management team usually snakes around my direct questions. I am green in the business, so please answer me this. Should life insurance be the center of a persons financial life. I know it should be a part of it, but the maximum amount? Any praise or criticism of life insurance will be helpful. 




How does one "spend the death benefit while still alive"?

Borrowing out one's own money from cash value?  That's an expensive way to accumulate wealth.
Viatical settlement? Accelerated Death Benefit?  Generally you have to be of declining health or terminally ill to make that work.



Joe, Don't say that in range of the client!!!!! If they knew that only way to benefit from Life insurance was to die sooner than expected, there would be only a small market for it. That market would be mostly straight protection as found in level premium term life.

Insurance companies have been trying to promote life insurance as an "asset accumulation" vehicle forever. But it just doesn't work. The costs of insurance and internal expenses cause life insurance (and VA's) to be dominated by straight investments for the purpose of wealth accumulation.

It's always possible to come up with great projections, but if life insurance was such a great investment you wouldn't have to go through such antics. It would be immediately obvious.

You would see many life insurance millionaires left and right, and they would be alive to tell about it.



Life insurance == Very profitable for insurco, and do you really need extra quaters when the game is over?


So where is it written that the only thing you will ever need is  some mutual funds or stocks ect.  I seriously hope you are being tongue and cheek here and I am missing it.. becaue to me this whole statemnet plus the others, gives us advisors a bad name..

Jul 15, 2007 8:42 am
anonymous:

Closer,


Ignore Allreit on this subject.  A little bit of knowledge is very dangerous.


Allreit, you are the only one talking about life insurance being an investment.  You don't have to die sooner than expected to benefit from life insurance.  The only one's who don't benefit from life insurance are those who cancel their policies.


Whole life insurance is a phenomenal asset that most people who are not financially struggling should own.  It is not an investment.


Borrowing money from the policy is a great way to get to cash when cash is needed.  Ex. Client has $500,000 of cash in their policy and $2,000,000 of mutual funds.  The market takes a hit and now the client only has $1,500,000 in mutual funds.  Client needs $50,000.  The life insurance allows the client to not touch their investments when the market is down.



AMEN!

Jul 15, 2007 12:24 pm
whitewlfz:

So where is it
written that the only thing you will ever need is  some mutual
funds or stocks ect.  I seriously hope you are being tongue and
cheek here and I am missing it.. becaue to me this whole statemnet plus
the others, gives us advisors a bad name..





Nowhere, However insurance is in general oversold owing to the hefty comissions that it pays.



Most people need nothing more than 30y level premium term life and
maybe a small whole life policy. Of course that  is not what most
people are sold...



As a savings/investment vehicle, insurance policies are hopelessly
dominated by straight investments, owning the built in costs of
insurance, the kick back to the agent, and insurco profit margins.

Jul 15, 2007 2:11 pm

However insurance is in general oversold owing to the hefty comissions that it pays.


You have to be able to back up these types of statements.  Most people have dreams and goals for their families.  One of the goals that most people have is for their dreams and goals for their families to still happen if they die prematurely.  Most people don't have enough life insurance to allow this to happen. 


Most people need nothing more than 30y level premium term life and maybe a small whole life policy. Of course that  is not what most people are sold...  


I'm sure that you agree that life insurance for someone with a family is critical.  Almost every week, I talk to someone who needs life insurance and can't get it at affordable rates.  The one thing that almost all of these people have in common is that they could have bought insurance when they just started their working lives.  Therefore, I am a very strong advocate of life insurance for single people who expect to have a family later in life.  If they buy a 30 year policy, most of them would still need coverage when they are in their fifties.  Many of these would be uninsurable at that time.  My point is that it is easy to get screwed with level term products. 


As a savings/investment vehicle, insurance policies are hopelessly dominated by straight investments 


This is an unfair comparison.  All savings vehicles are dominated by straight investments.  Compare it to long term savings vehicles if you want a fair comparison.

Jul 15, 2007 2:46 pm
AllREIT:
whitewlfz:

So where is it written that the only thing you will ever need is  some mutual funds or stocks ect.  I seriously hope you are being tongue and cheek here and I am missing it.. becaue to me this whole statemnet plus the others, gives us advisors a bad name..




Nowhere, However insurance is in general oversold owing to the hefty comissions that it pays.

Most people need nothing more than 30y level premium term life and maybe a small whole life policy. Of course that  is not what most people are sold...

As a savings/investment vehicle, insurance policies are hopelessly dominated by straight investments, owning the built in costs of insurance, the kick back to the agent, and insurco profit margins.


Cocksucker, did you know that everything costs money? Do you realize that commissions are legal? That's right. I said it. THey're legal.


What world are you living in? Why do you assume that people are so gullible that they will lose their impulse control, go mad, and buy something they don't want?  People are free to self-insure all they want. Why do you suppose they don't do it? Do you know that people know that we get paid commissions? Do you think that they are too stupid to figure out that we're in business to make money?


Just because YOU can't thrive in the marketplace with your bullsh*t, perpetual fees, doen't mean that your competition is doing something wrong.