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Jul 15, 2007 7:17 pm

[quote]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 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. [/quote]

I wont say anyone got screwed, but they didn't choose the insurance that best fit their situation. N.B I'm going to say that VUL doesn't fit anyones personal sitation.

IMHO long duration term policies or convertable term or WL with buy options is often the most flexiable and cheapest per $ of death benefit. And the death benefit is what insurance is about.

Again it comes down to making up a chart of liabilites, and then chosing assets/insurance that best matches them. In general liabilities like mortgages, educations etc tend to roll off within 30 years or so.

Jul 15, 2007 7:22 pm

[quote=AllREIT] [quote=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..

[/quote]

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

So, because insurance companies pay agents a commission, people shouldn't by through an advisor?  Huh, that's interesting logic.

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...

Please explain your logic behind your insurance strategy.  I ask because term insurance is the biggest ripoff out there.  About 1% of term policies ever pay a death claim.  So, all the premium you paid is lost.  For all the opinions you've given, this makes the least sense.  You're always up in arms about insurance companies making huge profits yet you recommend the policy that will make the insurance company the MOST profit.

I'd debate life insurance more with you, but I'm afraid it wouldn't be a fair fight.  When you get some additional knowledge, I'd be happy to discuss it with you.  Right now, you look foolish.

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.

Like anon said, comparing insurance policies to investing is not an apples to apples comparision.  Comparing insurance to savings vehicles makes more sense.  When you look at all the facts, insurance products fair quite well vs. savings vehicles. 
[/quote]

Jul 15, 2007 7:38 pm

[quote=AllREIT]

[quote]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 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. [/quote]

I wont say anyone got screwed, but they didn't choose the insurance that best fit their situation. N.B I'm going to say that VUL doesn't fit anyones personal sitation.

I think we're in agreement.  VUL is not appropriate in almost all situations. 

IMHO long duration term policies or convertable term or WL with buy options is often the most flexiable and cheapest per $ of death benefit. And the death benefit is what insurance is about.

I'm glad you finally got around to reading our comments.  Actually, level term is not always the least expensive option.  If you have a client who intends on converting coverage within 5-10 years to WL but cannot afford it, annual renewable term is a less expensive option.

Again it comes down to making up a chart of liabilites, and then chosing assets/insurance that best matches them. In general liabilities like mortgages, educations etc tend to roll off within 30 years or so.

You look at insurance from a needs standpoint.  Which is fine, but IMO is incorrect.  Like I mentioned earlier in this thread, we do not know where the client is going to be 30 years from now. 

I can't tell you how many 60-somethings I've met who all wish they still had life insurance.  Why?  They bought a new house and need to protect the mortgage.  But they're uninsurable.  They start a new family with a new spouse.  They would like to pay off estate taxes so they're not a burden on their family.  But they cannot afford it.  They decide that instead of letting life pass them by, they are going to keep working for as long as they can.  They still need to protect their income but their term policy lapsed and they've got little options.

Do you see why having a one-size fits-all approach to life insurance design is flawed?  Can you see why a need-based approach is flawed?

[/quote]
Jul 15, 2007 7:48 pm

[quote=deekay][quote=AllREIT] [quote=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..

[/quote]

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

So, because insurance companies pay agents a commission, people shouldn't by through an advisor?  Huh, that's interesting logic.

Now if you just stick to what I say, you'll have plenty of grist for the mill. I said insurance is oversold owning to the heavy incentive to sell it. Maybe I should be more specific and say that VUL/WL is oversold.

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...

Please explain your logic behind your insurance strategy.  I ask because term insurance is the biggest ripoff out there.  About 1% of term policies ever pay a death claim.

So what, the purpose of insurance is risk transfer. What percentage of homeowners policies pay out thier full value? Are the premiums lost? They are an expense, just like everything else

With term you are buying as much life protection as you need, for only as long as you need it, and nothing extra.

So, all the premium you paid is lost.  For all the opinions you've given, this makes the least sense.

Buy a term policy with a return of premium rider.

Term is ment to do one thing (cover mortality risk for a set period) and it does it cheaper and better than any other product.

You're always up in arms about insurance companies making huge profits yet you recommend the policy that will make the insurance company the MOST profit.

No the most profit comes from things like VUL that are hard to price and thus not in a competative market. If term was the most profitable, it would have the highest commissions .

I'd debate life insurance more with you, but I'm afraid it wouldn't be a fair fight.  When you get some additional knowledge, I'd be happy to discuss it with you.  Right now, you look foolish.


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.

Like anon said, comparing insurance policies to investing is not an apples to apples comparision.  Comparing insurance to savings vehicles makes more sense.  When you look at all the facts, insurance products fair quite well vs. savings vehicles. 

Not really. Insurance is often sold as an alternative to investments (via things like a VUL and VA's)

[/quote]

Jul 15, 2007 7:59 pm
deekay:

[quote]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 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. [/quote]

I wont say anyone got screwed, but they didn't choose the insurance that best fit their situation. N.B I'm going to say that VUL doesn't fit anyones personal sitation.

I think we're in agreement.  VUL is not appropriate in almost all situations.

Good . The sale of VUL is my biggest issue with how life insurance is sold.

IMHO long duration term policies or convertable term or WL with buy options is often the most flexiable and cheapest per $ of death benefit. And the death benefit is what insurance is about.

I'm glad you finally got around to reading our comments.  Actually, level term is not always the least expensive option.  If you have a client who intends on converting coverage within 5-10 years to WL but cannot afford it, annual renewable term is a less expensive option.

Ok, you come up with a cheaper situation, since annually renewable term is the pureest form of life insurance. My core point still holds that for the purposes of risk transfer over long set periods of time level premium term is the cheapest.

Again it comes down to making up a chart of liabilites, and then chosing assets/insurance that best matches them. In general liabilities like mortgages, educations etc tend to roll off within 30 years or so.

You look at insurance from a needs standpoint.  Which is fine, but IMO is incorrect.  Like I mentioned earlier in this thread, we do not know where the client is going to be 30 years from now. 

Do you see why having a one-size fits-all approach to life insurance design is flawed?  Can you see why a need-based approach is flawed?

You're making a bit of a straw man here. People whose lives are in flux are going to have dynamic insurance needs. But thats one of those things that comes out in the needs based planning process.

As best I can tell, (and I could be wrong, and am very open to hearing about it ) there isn't a better way to figure out peoples insurance needs than via a needs based planning process.

(I guess with some kind of fancy UL/Adjustable Life policy you could fit these issues in, but UL is going to be more expensive than LPT. So you need to be really sure than UL is needed over the standard WL/Term stack. I'm not denying that tricky life underwriting cases exist. Just that I think most cases are simpler than commonly thought. )

Jul 15, 2007 8:45 pm

[quote=AllREIT] [quote=deekay]

[quote]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 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. [/quote]

I wont say anyone got screwed, but they didn't choose the insurance that best fit their situation. N.B I'm going to say that VUL doesn't fit anyones personal sitation.

I think we're in agreement.  VUL is not appropriate in almost all situations.

Good . The sale of VUL is my biggest issue with how life insurance is sold.

IMHO long duration term policies or convertable term or WL with buy options is often the most flexiable and cheapest per $ of death benefit. And the death benefit is what insurance is about.

I'm glad you finally got around to reading our comments.  Actually, level term is not always the least expensive option.  If you have a client who intends on converting coverage within 5-10 years to WL but cannot afford it, annual renewable term is a less expensive option.

Ok, you come up with a cheaper situation, since annually renewable term is the pureest form of life insurance. My core point still holds that for the purposes of risk transfer over long set periods of time level premium term is the cheapest.

AllReit, is cheapest always the best?  If it were, we'd all drive Yugos, only rent apartments vs. owning, and when we take our families out to eat, we'd only go to McDonalds.

Again it comes down to making up a chart of liabilites, and then chosing assets/insurance that best matches them. In general liabilities like mortgages, educations etc tend to roll off within 30 years or so.

You look at insurance from a needs standpoint.  Which is fine, but IMO is incorrect.  Like I mentioned earlier in this thread, we do not know where the client is going to be 30 years from now. 

Do you see why having a one-size fits-all approach to life insurance design is flawed?  Can you see why a need-based approach is flawed?

You're making a bit of a straw man here. People whose lives are in flux are going to have dynamic insurance needs. But thats one of those things that comes out in the needs based planning process.

I disagree.  The needs-based planning process focuses on how much is left on the mortgage, how much college will cost (estimated) and any other bills that need to get paid off.  These are calculated in terms of what those bills are TODAY.  We do not know what those bills will be in the future.  They could be more, they could be less.  To make sure we take the guesswork out of the equation, ensure for the full human economic value.  That is, how much will your insurance company give you in coverage.  That is the only way to make sure you don't attempt to guess what someone's insurance need will be in the future.

As best I can tell, (and I could be wrong, and am very open to hearing about it ) there isn't a better way to figure out peoples insurance needs than via a needs based planning process.

Again, I point you to the concept of replacing one's full economic value.  When you purchase car insurance, do you get enough to replace the full cost of the car or just enough to buy a car you 'need'?  When you purchase homeowner's insurance, do you get full coverage or just enough to fulfill your needs? 

If you said less then the full amount for replacement, we don't need to continue further.  If you did say you want to have your car and house replaced fully, why wouldn't you want to insure yourself for the full replacement value? 

(I guess with some kind of fancy UL/Adjustable Life policy you could fit these issues in, but UL is going to be more expensive than LPT. So you need to be really sure than UL is needed over the standard WL/Term stack. I'm not denying that tricky life underwriting cases exist. Just that I think most cases are simpler than commonly thought. )

With every one of my clients, we focus on getting maximum coverage first.  We do not discuss product before we are on the same page with the amount of coverage we want.  And you're right, 99% of my cases are term/WL combos.  I like to keep it simple.  Although when I show them the benefits of WL, they want to find out more (or how they can convert their term insurance in the future).  To summarize, we focus on the coverage FIRST then discuss how to fit it in their budget.

[/quote][/quote]
Jul 15, 2007 9:21 pm

Jul 15, 2007 9:29 pm

[quote=deekay]

IMHO long duration term policies or convertable term
or WL with buy options is often the most flexiable and cheapest per $
of death benefit. And the death benefit is what insurance is about.

I'm glad you finally got around to reading our comments.  Actually, level term is not always the least expensive option.  If you have a client who intends on converting coverage within 5-10 years to WL but cannot afford it, annual renewable term is a less expensive option.

Ok, you come up with a cheaper situation, since annually renewable term is the pureest form of life insurance. My core point still holds that for the purposes of risk transfer over long set periods of time level premium term is the cheapest.

AllReit, is cheapest always the best?  If it were, we'd all drive Yugos, only rent apartments vs. owning, and when we take our families out to eat, we'd only go to McDonalds.

When it comes to insurnace, paying more for the same amount of risk transfer is foolishness.

Again it comes down to making up a chart of liabilites, and then chosing assets/insurance that best matches them. In general liabilities like mortgages, educations etc tend to roll off within 30 years or so.

You look at insurance from a needs standpoint.  Which is fine, but IMO is incorrect.  Like I mentioned earlier in this thread, we do not know where the client is going to be 30 years from now. 

Do you see why having a one-size fits-all approach to life insurance design is flawed?  Can you see why a need-based approach is flawed?

You're making a bit of a straw man here. People whose lives are in flux are going to have dynamic insurance needs. But thats one of those things that comes out in the needs based planning process.

I disagree.  The needs-based planning process focuses on how much is left on the mortgage, how much college will cost (estimated) and any other bills that need to get paid off.  These are calculated in terms of what those bills are TODAY.  We do not know what those bills will be in the future.  They could be more, they could be less.  To make sure we take the guesswork out of the equation, ensure for the full human economic value.  That is, how much will your insurance company give you in coverage.  That is the only way to make sure you don't attempt to guess what someone's insurance need will be in the future.

Most insurance companies will max you at $5 million. Most people do not need anywhere near as much, nor is likely that would ever need so much in the future.

I can see the theoretical elegance of doing PV(Income stream) and saying that is as much insurance as you need. But in many cases that could exceed/fall short all of the persons identified insurance needs.

Over insurance has a heavy opportunity cost from all the money that went into insurance payments that could have been spent on something else while you were alive .

As best I can tell, (and I could be wrong, and am very open to hearing about it ) there isn't a better way to figure out peoples insurance needs than via a needs based planning process.

Again, I point you to the concept of replacing one's full economic value.  When you purchase car insurance, do you get enough to replace the full cost of the car or just enough to buy a car you 'need'?  When you purchase homeowner's insurance, do you get full coverage or just enough to fulfill your needs?

P&C insurance is different than life insurance because of the graduated payouts, most claims will be less than for the full balance of the policy. The full cost of the house/car is as much insurance as I need. (excepting auto liability)

If you said less then the full amount for replacement, we don't need to continue further.  If you did say you want to have your car and house replaced fully, why wouldn't you want to insure yourself for the full replacement value? 

Because humans don't have a quantifiable replacement value. They have liabilities that need to be defeased. And to offset those liabilites you can buy life insurance.

(I guess with some kind of fancy UL/Adjustable Life policy you could fit these issues in, but UL is going to be more expensive than LPT. So you need to be really sure than UL is needed over the standard WL/Term stack. I'm not denying that tricky life underwriting cases exist. Just that I think most cases are simpler than commonly thought. )

With every one of my clients, we focus on getting maximum coverage first.  We do not discuss product before we are on the same page with the amount of coverage we want.  And you're right, 99% of my cases are term/WL combos.  I like to keep it simple.  Although when I show them the benefits of WL, they want to find out more (or how they can convert their term insurance in the future).  To summarize, we focus on the coverage FIRST then discuss how to fit it in their budget.

The main benefit of WL is that it doesn't go away. The downside is that it's over-costed unless you break to about 75 or so. The life companies make alot of money from lapsed WL policies. Which is why they are crying bloody murder over life settlement investors, who are keeping WL policies in force to the bitter end.

[/quote]
Jul 15, 2007 9:34 pm

[quote=joedabrkr]This is a good discussion, but I have to say that the colors are killing me and it's getting hard to follow.

There must be a better way to structure it.

Either way-thanks for taking the time to offer useful thoughts on both sides.
[/quote]

Haha - I was thinking the same thing.  I'll summarize:

I feel it is worthwhile to own insurance past 65 or when the mortgage gets paid/kids off at school/retirement, etc.  I disagree with the methodology behind "needs-based" insurance planning.  It leaves too many holes and doesn't properly address the future unknown insurance needs.  There is an added benefit of holding life insurance in retirement - estate and income planning.  The best plan to address these two issues is MONEY.  Therefore, life insurance provides the needs to simplify the estate planning and enhance income planning.

AllReit feels all insurance agents and insurance companies are evil because they make profits.  He feels that one should only buy life insurance to protect known liabilities.  However, he fully insures his house and car.  He constantly compares insurance to investments.  Which, any sane financial advisor knows is not a fair comparison. 

Did I leave anything out?

Jul 15, 2007 10:04 pm

[quote=AllREIT] [quote=deekay]

When it comes to insurnace, paying more for the same amount of risk transfer is foolishness.

I couldn't agree with you more.  However, there is a side to this I think you are missing.  It is a very important one.  To illustrate - let's say you and Mrs. AllReit are heading out to dinner in downtown San Francisco.  You encounter two parking garages equidistant from your restaurant.  One costs $10 to park and the other is $20 to park but will refund your $20 when you leave.  Which garage do you pick?  Why? 

Most insurance companies will max you at $5 million. Most people do not need anywhere near as much, nor is likely that would ever need so much in the future.

That is very incorrect.  Insurance companies vary in terms of how much they will cover you for.  Generally, it is based on your age and your current income or one times your net worth.  For example, a 30 year old making $200k per year can get insured for up to $6mm.

How do you know how much they need in the future?  Do you know where estate tax rates will be?  How about income taxes?  You are assuming alot about the future and what people will 'need'.  That is very dangerous.

I can see the theoretical elegance of doing PV(Income stream) and saying that is as much insurance as you need. But in many cases that could exceed/fall short all of the persons identified insurance needs.

Exactly.  Which is why I discuss maximum coverage with all my clients.  That is the only way I know of how to protect against future life insurance needs.

Over insurance has a heavy opportunity cost from all the money that went into insurance payments that could have been spent on something else while you were alive .

This statement, coming from you, is very puzzling.  On the one hand, you state there is a lost opportunity cost with purchasing life insurance.  On the other hand, you advise buying term insurance and invest the difference.  Is there not a lost opportunity cost with loading up on so much term insurance? 

Again, I point you to the concept of replacing one's full economic value.  When you purchase car insurance, do you get enough to replace the full cost of the car or just enough to buy a car you 'need'?  When you purchase homeowner's insurance, do you get full coverage or just enough to fulfill your needs?

P&C insurance is different than life insurance because of the graduated payouts, most claims will be less than for the full balance of the policy. The full cost of the house/car is as much insurance as I need. (excepting auto liability)

Let's focus on replacement for now instead of getting into auto liability.  You stated the full cost of the house/car is as much insurance as I need.  I interpret this as "full replacement".  Correct me if I am wrong.

You see, we as human beings have a full replacement value.  Disagree?  Well, if someone were to be negligent and either permanently disable you or kill you in, say, a car accident, how much do you think you or your family would sue for?  If you said anything less than the maximum, you're either lying or you're a fool.  The courts use a table to determine the maximum amount you could sue for (not including punitative damages).  The table is based on your age and income!  Sound familiar?  That's the exact formula most insurance companies use.

Because humans don't have a quantifiable replacement value. They have liabilities that need to be defeased. And to offset those liabilites you can buy life insurance.

Please read my above comments.

With every one of my clients, we focus on getting maximum coverage first.  We do not discuss product before we are on the same page with the amount of coverage we want.  And you're right, 99% of my cases are term/WL combos.  I like to keep it simple.  Although when I show them the benefits of WL, they want to find out more (or how they can convert their term insurance in the future).  To summarize, we focus on the coverage FIRST then discuss how to fit it in their budget.

The main benefit of WL is that it doesn't go away. The downside is that it's over-costed unless you break to about 75 or so.

Define 'over-costed'.  Compared to what?  You mean to tell me it is less expensive for someone to buy term until age 65 and then try to buy another 10YT until age 75?  I'll give you a hint - it's not.

The life companies make alot of money from lapsed WL policies. Which is why they are crying bloody murder over life settlement investors, who are keeping WL policies in force to the bitter end.

It is an absolute shame when a WL policy is lapsed.  Part of those lapses can be uncontrollable (i.e. client lost income, can't afford it).  However, the main reason WL policies lapse is they are sold incorrectly.  If they were sold properly and the client fully understood the benefits AND as long as the client maintained the means to pay for the policy, they would NEVER get rid of it.  Unfortunately, we both know this isn't always the case. 

Life settlement advisors are the scum of the earth and serve no purpose other than to suck blood from the insurance industry, clients, advisors, and humanity.  It won't be too soon that they are shut down like the viaticles were.

[/quote][/quote]

Jul 16, 2007 12:44 am

ALLREIT, I agree that VUL is oversold.  WL on the other hand is way undersold.  VUL/UL is actually the most overpriced insurance that exists.  UL couples overpriced annually renewable term insurance with a poor savings vehicle.  VUL couples overpriced annually renewable term insurance with an overpriced investment vehicle. 

Participating WL policies from mutual companies are actually the cheapest way to buy life insurance.  You need to look at total cost and not initial cost.  The reason for this is that other forms of life insurance charge a predetermined "Cost of Insurance".  This COI must be high enough to cover the worst case scenario.  WL policyholders, on the other hand, ultimately pay for actual mortality.  Actual mortality has always been lower than the predetermined COI.

As for "needs analysis", it leads to people being underinsured.  People have goals and dreams.  They want their family's to still achieve these goals and dreams if they die.  It's not about having their needs covered.  It's about having their wants covered.  It's the difference between having their having survive or having them thrive.

Term insurance is so damn cheap now, especially ART policies that are sold as riders on WL policies.  It simply doesn't make any financial sense for someone young and healthy to not get as much coverage as the insurance company will give to them.  The premium is too low for the opportunity cost to have any relevance. 

Jul 16, 2007 1:48 am

Well said, anonymous.  I forgot to mention the COI vs. mortality calculation.  That’s a huge determining factor when looking at WL vs. term.

Jul 16, 2007 7:40 pm

[quote=anonymous]

WL is actually the cheapest way to buy life insurance.  You need to look at total cost and not initial cost.  The reason for this is that other forms of life insurance charge a predetermined "Cost of Insurance".  This COI must be high enough to cover the worst case scenario.  WL policyholders, on the other hand, ultimately pay for actual mortality.  Actual mortality has always been lower than the predetermined COI.[/quote]

Keep in mind that "dividends" are really RETURN OF PREMIUM, NOT dividends.  Look at NML, they tend to rate everyone for something and get an overpriced policy started up, making it pretty easy to give 8-9% back a year........

Jul 16, 2007 8:00 pm

Keep in mind that "dividends" are really RETURN OF PREMIUM, NOT dividends.  Look at NML, they tend to rate everyone for something and get an overpriced policy started up, making it pretty easy to give 8-9% back a year........

Wrong.  What's wrong?  Just about every word of your post. 

Just because they are treated as a return of premium from a tax standpoint does not make them an actual return of premium.  Treating them as "return of premium" simply gives the internal buildup of cash favorable tax treatment.  This is not the same as actually being a return of premium.

NML rates a small percentage of people.  Don't confuse not giving super preferred rates with being rated.   If a policy does get rated, the dividend paid gets smaller.  Even if the dividend is 8%, they are not giving 8% a year back.

Jul 16, 2007 8:09 pm

I have yet to meet someone (including NML agents-I was one myself) who could explain just how the dividend % is calculated and what SPECIFICALLY it is.  All they tell people is 8.8% return, as their marketing pieces show.  Anyone care to explain how the 8-9% is calculated?  It is not simply a % of returned premium.

Jul 16, 2007 8:46 pm

[quote=anonymous]

As for
"needs analysis", it leads to people being underinsured.  People
have goals and dreams.  They want their family’s to still achieve
these goals and dreams if they die.  It’s not about having
their needs covered.  It’s about having their wants covered. 
It’s the difference between having their having survive or having
them thrive.

[/quote]



Anon, this is going to come down to a matter of perspective.



My take is that there are better uses of cash than spending it on life
insurance. Going for maximum DB is going to lead to higher monthly
premiums which make the policy more likely to lapse, should the assured
become unemployed disabled etc.



Far better IMHO to spend that money on top notch DI/LTC, which benefits
the living, vs excess LI which benefits the survivors at the expense of
the deceased.



What I’ve found is that life agents sometimes propose life insurance far in excess of the assured’s identifiable needs for life insurance
(educations, mortgages, burial expenses, + Income annuity). Those
identifiable needs,  will usually present a  compelling solid
case for buying life insurance.


Jul 16, 2007 8:50 pm

[quote=theironhorse]I have yet to meet someone (including NML agents-I
was one myself) who could explain just how the dividend % is calculated
and what SPECIFICALLY it is.  All they tell people is 8.8% return,
as their marketing pieces show.  Anyone care to explain how the
8-9% is calculated?  It is not simply a % of returned premium.
[/quote]



No one can explain it. Please sign on the dotted line.

Jul 16, 2007 8:57 pm

I've never seen a marketing piece from any insurance company call a dividend of x% a rate of x%.  There are certainly plenty of unscrupulous or unknowledgeable agents confusing the two of them.

Dividends are a participating policyowner's share of any distribution of surplus.  There are 3 parts to dividends.

1) Investment returns that are better than assumed
2) Mortality that is better than assumed
3) Expenses that are less than assumed

The % that people talk about is calculated based upon what the insurance company is earning from their general account.  It is not what a policy is earning.  The company still has to pay their expenses before they can pay the dividend.  If the insurance company is crediting 8.5% and the guarantees are based upon 4%, and the mortality and expenses are the same as is assumed or less, it will create a dividend.  How do they credit this amongst various policies?  I don't know.

Jul 16, 2007 9:13 pm

[quote=anonymous]NML rates a small percentage of people.  Don't confuse not giving super preferred rates with being rated.   [/quote]

I beg to differ, having worked there as an agent.........we had 26 different rating classes.......

I decided to leave when I heard a senior agent say to a client to "think of the yearly dividend rate as the FIXED INCOME portion of your porftolio"..............

Jul 16, 2007 9:58 pm

[quote=AllREIT] [quote=anonymous]

As for "needs analysis", it leads to people being underinsured.  People have goals and dreams.  They want their family's to still achieve these goals and dreams if they die.  It's not about having their needs covered.  It's about having their wants covered.  It's the difference between having their having survive or having them thrive.

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Anon, this is going to come down to a matter of perspective.

My take is that there are better uses of cash than spending it on life insurance. Going for maximum DB is going to lead to higher monthly premiums which make the policy more likely to lapse, should the assured become unemployed disabled etc.

Far better IMHO to spend that money on top notch DI/LTC, which benefits the living, vs excess LI which benefits the survivors at the expense of the deceased.

What I've found is that life agents sometimes propose life insurance far in excess of the assured's identifiable needs for life insurance (educations, mortgages, burial expenses, + Income annuity). Those identifiable needs,  will usually present a  compelling solid case for buying life insurance.

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Let me ask all of you these questions.  This could help one of your clients someday.  It may help yourselves too. 

If you were blindsided by a runaway truck, woke up in a hospital, and were told you were never able to work again, would you sue?  How much would you sue for?  How did you come up with this number?

If you were then told you have 5 days to live, how much would you counsel your spouse to sue for?  How did you come up with this number? 

I ask these questions because it gets to the heart of ALL insurance planning.  I truly believe this will get a good dialogue going and will help us all as advisors.  I thank you in advance and I look forward to reading the responses.