Bluestar, I know this is going to sound like semantics, but any rating standard or above is not a rated policy.

ALLREIT, Let me agree with your post, but give it a slightly different perspective.

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.

The premium difference, as you will see in a minute, is too small to make a difference.  My experience has actually shown the opposite.  The more someone believes in insurance, the more that they will buy and the less likely that the policy will lapse.

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.

Again, the premium difference is too small to make a difference.   It won't even pay for one month of DI coverage.  I do believe that DI is imperative.

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.

That's fine.  We can just look at identifiable needs.  It is really that "income annuity" that drives everything.  Unfortunately, when I read "rules of thumb" for insurance needs, it is usually in the range of 7-10 x income.  This is just way too low in most cases.  It replaces a $100,000 income with a lump sum of $1,000,000.  Using Monte Carlo analysis, this $1,000,000 will safely generate $40,000 of income before tax.  This does not allow the family to maintain the same standard of living.  What is really needed is $2,500,000 which is 25x income which, not coincidentally, is in the neighborhood of how much coverage the insurance company will issue.

(Yes, I know, that some expenses will disappear.  On the other hand, other expenses will increase.)

As for cost, a 29 year old healthy female can get $1,000,000 of term for $215.  She can get $2,000,000 for $355.  That extra $140 that she is spending is irrelevant.  It's one very fancy dinner.

For the vast majority of my clients, it does not matter if they buy $500,000, $1,000,000, $2,000,000 of coverage.  The premium is identical.  All that changes is the mix between term insurance and WL insurance.

[quote=deekay][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.

[/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.

[/quote]

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?

I'd let the lawyer handle it. And this question isn't a good fit since being alive I now have lots of LTC/medical costs issues ( and should have bought LTC/DI/AD&D over life insurance ).

Life insurance is about clean deaths only. In general the amount to sue for (compensatory damages only) would be for LTC plus lost income. You can figure out that amount with any lifetime annuity calculator.

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?

Same thing, let the lawyer handle it. Again sue for Medical costs/burial costs, 5 cases of champagne and a lifetime annuity for the net Disposable income (E.g gross income gets marked down due to food expenses etc) I would generate.

Use the nifty BRKdirect Spia calculator .

http://www.brkdirect.com/spia/EZQUOTE.ASP

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.

The SPIA calculator won’t do it unless it is a SPIA that increases the payout with inflation.

[quote=anonymous]

Bluestar, I know this is going to sound like semantics, but any rating standard or above is not a rated policy.

ALLREIT, Let me agree with your post, but give it a slightly different perspective.

[quote=anonymous]The SPIA calculator won’t do it unless it is a SPIA that increases the payout with inflation.[/quote]



http://www.aigretirementgold.com/vlip/VLIPController?page=Re questaQuote

What I do not go for is folks saying; Well the insurance companies max policy is $5 million, and surely your life is worth at least that much , so thats how much you should buy .

Agreed. 

One thing that I don't like about your model is that it assumes that debts decrease over time.  In reality, debts tend to increase over time.  Go talk to a 55 year old.  Ask him how much debt he had when he was 30.  I'd bet that over 90% of 55 year olds have more debt than when they were 30.  (When they were 30, they had a $20,000 mortgage on a $40,000 house.  At 55, they have a $300,0000 mortgage on a $600,000 house.

I try to get my clients, in most cases, to buy as much WL as they can easily afford.  We never sacrifice type of coverage for amount of coverage.

back to the dividend.  you think only a small % of agents clarify dividend % vs. rate of return?  hardly.  i have sat in training sessions as mentioned earlier in this thread where NML 65 life is praised as the greatest thing since sliced bread and how it should be the main floor of every financial pyramid.  8.8% was the number when I was there, and it was positioned as the “guaranteed” portion of the clients portfolio, as it was compared to the S&P return in NML marketing pieces.

 

And there is a reason NML’s last question in their confidential questionnaire asks what the monthly $ commitment is.  It will determine the blend of an ACL or a Perm/Term.  Max out the WL portion, which just coincidentally maxes commission.  I don’t have a problem with insurance, I sell alot of it, but it is so abused it is comical.

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

[/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.

[/quote]

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?

I'd let the lawyer handle it. And this question isn't a good fit since being alive I now have lots of LTC/medical costs issues ( and should have bought LTC/DI/AD&D over life insurance ).

Life insurance is about clean deaths only. In general the amount to sue for (compensatory damages only) would be for LTC plus lost income. You can figure out that amount with any lifetime annuity calculator.

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?

Same thing, let the lawyer handle it. Again sue for Medical costs/burial costs, 5 cases of champagne and a lifetime annuity for the net Disposable income (E.g gross income gets marked down due to food expenses etc) I would generate.

Use the nifty BRKdirect Spia calculator .

http://www.brkdirect.com/spia/EZQUOTE.ASP

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.

[/quote][/quote]

OK, so you let the lawyer determine the amount he/she will sue for in the event you are permanently disabled.  How much do you think the lawyer will sue for?  They're going to recommend you sue for the MAXIMUM.  Why?  Lost wages PLUS COLA PLUS medical expenses PLUS inflation (personal inflation, not CPI).  This is why I also discuss DI/LTC planning with my clients.  I never just have my clients purchase life insurance.

When I ask my clients these questions, they all say the same thing - as much as I could sue for.  This is what they WANT.

Likewise, when the situation is worsened and you are about to die, my clients say they would sue for as much as they could.  Natural death, death by accident, what does it matter?  It represents a loss, both personal and economic (by the way, what the hell does "clean death" mean?)  Let's say you're an up-and-coming legal mind.  You make $200k per year.  Is it safe to say that your lost pay increases would be greater than a 3% COLA?  I, and my clients would argue, they would be.  Ergo, a SPIA with a COLA rider would not completely replace the income lost either by death or disability.  My clients WANT income replaced COMPLETELY or as close to completely as possible.

AllReit, I get the sense you have never, nor ever will, sell life insurance.  And that's ok, your expertise lies elsewhere.  I like dealing with clients on a human level; no talk about beta or correlation coefficients or yield curves.  I get to the heart of the matter, and what matters to my clients is an unwavering passion to take care of themselves and their families as best they can.  Because they or I do not know what the future holds, what interest rates will be, what their personal inflation rate will be, what college costs will be, where the market will be, or where in general they will be in life, I make sure we take as much as the guess work out of the equation.  In a nutshell, MAXIMUM COVERAGE. 

I have yet to hear of a single widow or widower remark that they received too large a death settlement.  However, I have seen countless situations where a death benefit was too small.  And I'll be damned if I EVER have to have the conversation with a family as they ask me, "Why didn't you sell my mom/dad/sister/brother/child more life insurance?"

DK, I don’t whip clients into an emotional state for the purpose of selling life insurance.



I don’t think I’ve ever sold life insurance, but I have helped alot of people buy life insurance.



I think financial decisions need to be made in an objective
dispassionate framework. Where you look at needs and then match
insurance coverage to those needs to get a tight fit.

But thats not the way to do things if your goal is to sell and close on lots of life insurance/annuity premium .
In that case you want to create lots of percieved need for life
insurance/annuities, and get ink on paper before the smoke clears.



And a good lawyer will not sue for “the maximum” but for what is
feasable and can be settled quickly. The only people who win in a
lawsuit are the lawyers.



Very similar to how the only people who win in an insurance contract are the insurco and the broker.



-------



What happens if you get disabled is a toatally different framework from what happens if you die.



Death means no income, disability means no income and lots of expenses.

[quote=AllREIT]DK, I don't whip clients into an emotional state for the purpose of selling life insurance.

I don't think I've ever sold life insurance, but I have helped alot of people buy life insurance.

I think financial decisions need to be made in an objective dispassionate framework. Where you look at needs and then match insurance coverage to those needs to get a tight fit.

There are two sides to the equation - the rational side and the emotional side.  They usually don't match.  However, when I show them how permanent life insurance enhances all their other assets, they want to purchase more.  And I've got no reservations about it.  I'm proud to say I sell life insurance.  My clients love me for what I do and how I go through their entire financial picture.

But thats not the way to do things if your goal is to sell and close on lots of life insurance/annuity premium . In that case you want to create lots of percieved need for life insurance/annuities, and get ink on paper before the smoke clears.

And here I was thinking you'd actually attempt a civil dialogue.  I should've known better.

And a good lawyer will not sue for "the maximum" but for what is feasable and can be settled quickly. The only people who win in a lawsuit are the lawyers.

I will give you that settlements are the end result most of the time.  They will ALWAYS start with the larger number first, though.  It's what's good for them AND the client.

Very similar to how the only people who win in an insurance contract are the insurco and the broker.

Again, I appreciate you attempting to drag this discussion into the gutter.  It only makes me look better and you,.....well, you kinda look like a jerk.

-------

What happens if you get disabled is a toatally different framework from what happens if you die.

Death means no income, disability means no income and lots of expenses.

No question.  Did I ever say I neglect DI?  In fact, we have that discussion before we even discuss life insurance.





[/quote]

Overall, I think we're going to have to agree to disagree.  But if you ever insinuate again that I am doing something dishonorable by showing my clients that they can buy maximum coverage if they wanted, our pleasant discussion will cease. 

I feel you do bring alot to this forum.  There is no need to resort to back-handed comments and accusations of dishonesty or doing less than what is in my clients very best interest.

back to the dividend.  you think only a small % of agents clarify dividend % vs. rate of return? 

I don't think that.  I think many agents confuse this and pathetically, it is often because they don't know the difference.  Agents of your former company seem to be especially guilty of this.  I said that I haven't seen company produced marketing material that makes this mistake.

I think financial decisions need to be made in an objective dispassionate framework.

This simply doesn't work for insurance.  People don't want to deal with death and disability.  Insurance gets ignored in a dispassionate framework.  It shouldn't, but it does.  

But thats not the way to do things if your goal is to sell and close on lots of life insurance/annuity premium . In that case you want to create lots of percieved need for life insurance/annuities, and get ink on paper before the smoke clears.

No widows will call it a "perceived" need. 

anonymous-I don’t think insurance is inherently bad.  I think many many agents abuse vul/va/wl contracts to fatten their wallet.  I have 60+ year olds all the time looking for insurance which will last their entire lifetime, so I know what you mean.  I have done and still do a considerable amount of life/di/ltc, so I believe in the product.

But I also think an agent can use the worst case scenario as a scare tactic and gloss over the pitfalls of a VUL/WL plan to make it an easier sale.  Plus I truly believe many agents can  “justify” a sale down the road in millions of ways, which may or may not be relevant to anything the client wanted.

There at just too many insurance guys out there who do not do enough business the “right way” to make a respectable income, so it is easier to take the quick payday and rationalize it later.  Not saying you do this at all. 

And on a somewhat related note there are guys in my urban area making $500K on 10-12% EIA’s, preying on the uninformed/uneducated.  Those people are WAY more dangerous than misguided insurance guys generally.

There are certainly dishonest sales people selling everything.

VUL and WL should not be used in the same sentence.  It makes them appear to be similar products.   They are not.   

[quote=deekay]

Overall, I think we're going to have to agree to disagree.  But if you ever insinuate again that I am doing something dishonorable by showing my clients that they can buy maximum coverage if they wanted, our pleasant discussion will cease. 

[/quote]

Are you a nineteenth-century British author?

[quote=farotech][quote=deekay]

Overall, I think we're going to have to agree to disagree.  But if you ever insinuate again that I am doing something dishonorable by showing my clients that they can buy maximum coverage if they wanted, our pleasant discussion will cease. 

[/quote]

Are you a nineteenth-century British author?

[/quote]

Who are you again and why should I listen to you?

Do you have anything relevent to add?  If so, I'd like to hear what you think.  If not, why are you bothering to post at all?

[quote=anonymous]

I think financial decisions need to be made in an objective dispassionate framework.

This simply doesn't work for insurance.  People don't want to deal with death and disability.  Insurance gets ignored in a dispassionate framework.  It shouldn't, but it does.  

But thats not the way to do things if your goal is to sell and close on lots of life insurance/annuity premium . In that case you want to create lots of percieved need for life insurance/annuities, and get ink on paper before the smoke clears.

No widows will call it a "perceived" need. 

1) If you don't sell insurance, how can you be sure that your way works?

2) Using emotions is not using scare tactics.   Scare tactics is not the way to sell.

3) Insurability is fragile.  It should never wait until after something else is squared away.  One can invest if they can write a check.  Once someone's health changes, that's it for insurance.   We must get someone covered asap. 

4) Unless the investments are occurring in a vacuum, we need to look at someone's complete financial picture to make investment recommendations.  Therefore, insurance can't be brought up after the fact.

[quote=AllREIT] [quote=anonymous]

I think financial decisions need to be made in an objective dispassionate framework.

This simply doesn't work for insurance.  People don't want to deal with death and disability.  Insurance gets ignored in a dispassionate framework.  It shouldn't, but it does.  

But thats not the way to do things if your goal is to sell and close on lots of life insurance/annuity premium . In that case you want to create lots of percieved need for life insurance/annuities, and get ink on paper before the smoke clears.

No widows will call it a "perceived" need. 

[/quote]

It's been my experience that I bring up insurance *after* people get all their investments squared away. You set up a bond of trust, and can sell plenty of insurance in a rational way.

You said yourself you've never sold insurance but you've helped people buy insurance.  Which one is it?  Are we dealing in semantics?  Do you farm it out? 

Any CFP will tell you insurance is the building block of financial planning.  So what are you doing setting up their investments first?

You don't have to use scare tactics to sell a product that would sell itself if only you let it shine. But maybe I just deal with a different clientele than most folks here. I think people will deal with death and disability if you bring it up in a low pressure, non-threatening, non-confrontational way.

Neither do I.  I tell them the truth.  I've seen what premature death and total disability can do to a family.  If you ever did, you'd NEVER set someone's investments before insurance.  Please tell me, what kind of clientele do you deal with?  Aliens?  Immortals?  I deal with real people.  And I motivate them to deal with what needs to be dealt with first.  That is, get all your insurance straight.  PERIOD.  That goes from car insurance all the way to life insurance and everything in between.

The same rational framework that works with matching investments to long term continious liabilities (e.g retirement) works with matching life insurance to point liabilities (Educations, Mortgage, Burial Expenses, Income Annuity)

Again, you've said yourself you have never sold insurance.  People are not rational.  They purchase based on emotion.  Frankly, I question whether or not you even have clients.  Just my two cents.

[/quote]

Ok ..Guys ..

So I can summarize that one side here thinks buy the minimum you need for insurance and make it term or whole life..right.. and base it on the percieved economic needs only of today looking into tomorrow..

Secondly.. the other side thinks that life insurance is a funding vehicle to mitigate risk of premature death..and that you can use anything but a vul then applied to each individual case based on both the funding goals of the client and the needs..

Now I would then propose to you some questions.. I don't know who they would belong to as I have lost the perspective of each camp. if you will

VUL -- in short all feel sucks.. I have to disagree here .. there are some circumstances where this applies .. what do you do with the business owner that has $100k (His AGI is $550k a year) or better in excess cashflow.. We have done a 412i and we have funded all his qualified plans.. he has more $ and is looking for growth on it ...not necessarily the muni return.. He is under 50 so he has a ways to go ..before any qualified plan can be liquid enough so that it is an option ...(annuities included).. He has a documentable insurance need of $3 million (mort, college goals for 3 kids and replacement value of his economic output based on todays dollars) what would you recommend ..

Life Settlements.. lets be clear on this .. life settlements suck when there is no full disclosure .. when have a client walks in and sell a policy then walks out ..never knowing the gross up and never replaces it (unless it is truly not needed) for a lower premium/db policy .. then yes that is a problem..

Otherwise it does serve a purpose .. let me describe another scenario.. client is 74 yro male ..he had a (I didn't put him in this) VUL from another company ..that his CPA recommended he get involved in.. his premiums to keep it in force were $32k a year ..it had a cash value of $65 k .. but a surrender value of $3k  .. (nice huh) ..anyway he no longer needed $3 million in coverage as he sold his business and and all the girls are gone through school...

So we were able to sell the policy ..and put $80k in his pocket.. He still has an estate liquidity need ..and wanted to see that the girls got some $ to help settle the estate.. so we took the $80k and put it into a WL survivorship policy that in turn will provide him $1 million in coverage under the assumption he can pay $3k per year.. this is a real case for a client with a net worth over $6 million..

So I am not sure that you can accurately make any absolute statement about what is or is not correct in the fniancial industry in regard to never using this product or that one..

(those emoticons can be really annoying if over done .. )