Insurance Agent Forum

[Newby]

I am curious what inflation rate you guys use to figure how much coverage someone needs with a "Final Expense" policy.

I have always sold the policies with inflation protection built into the policy and have just started offering the level-benefit policies.

Say for example you sell a healthy 65 year old woman a policy and she wants it for funeral and cemetery expenses which she estimates to be $10,000 at today's prices. What amount do you recommend for her?

If you look at 25-year spans of time starting in 1950, the lowest average inflation rate was 3.5% during 1981-2005 based on the consumer price index. If you use longer time spans it gets worse (4.4% for 30-years and over.)

If you figure 3.5% average inflation here is what she needs at various ages:

Age 75 she needs $14,105
Age 85 she needs $19,897
Age 95 she needs $28,067
Age 100 she needs $33,335

How do you ethically and realistically go about advising her how much insurance she needs for final expenses? Too little coverage and you did not do her family a good service. Too much and she can not afford.

The ads on TV and magazines always go for $10,000 or $15,000 policies but it seems like they are really just going for a quick and easy sale rather than doing any kind of service for their clients.

It seems to me like the final expense companies should offer the inflation protection as an option on their policies (just like most LTC policies do.) It would make it affordable for people to realistically have the coverage they need rather than a wild guess. Are there any insurance companies out there offering such a product other than the pre-need funeral insurance companies?

[midwestbroker]

That is a great question.

There are a lot of factors to look at:

Premium - what they can afford
Funeral Costs - what kind of service do they want
Other Policies - what else do they have in place

Get some price sheets from local funeral homes. That will give you a base line on what to expect.

Here in KC, $7,000 will get you a decent funeral. So, I recommend $10,000. That way they have some inflation coverage. Also, if a family member goes to a funeral home with $10K, they will work with you in getting the service you want. They are not going to let you walk away.

Kind of like buying a car. Show up with a wad of cash and they will do all they can to sell you that car.

Also stress that this is a policy to add to their portfolio, not intended to replace any other policy they have.

[al3]

While on this topic, what is difference between Final Expense insurance and level term life? If you have a 60 year old woman looking for a $10,000 burial plan, why not just sell her 20 or 30 year term? Does Final Expense have an plan-end date or is it more like a WL where you pay until you reach 110?

Lastly, I'd like to know a recommendation for a carrier for FE in CA. I have a lot of 60 year old neighbors.

Al

[midwestbroker]

Most FE plans are WL. I have been using Monumental Life since they have a 10 pay option (paid up at 10 years). However, Assurity has a lower graded benefit rates.

If they ask about term, I tell them about the 10 pay option, that way if they live past the term, they still get the DB.

[Newby]

Originally Posted by al3

While on this topic, what is difference between Final Expense insurance and level term life? If you have a 60 year old woman looking for a $10,000 burial plan, why not just sell her 20 or 30 year term? Does Final Expense have an plan-end date or is it more like a WL where you pay until you reach 110?

Lastly, I'd like to know a recommendation for a carrier for FE in CA. I have a lot of 60 year old neighbors.

Al

Final expense is always whole life. They want final expense for one reason, death benefit on the day they die. The policies can be single-payment, 10-year payment or pay for life (age 100) but are always coverage for life.

Term is not usually an option for several reasons.How many people who buy term have it in force when they die...very,very few. Term is protection for a what if situation (what if I die at a young age and leave my family with no income.) Term policies usually aren't sold in small enough amounts for final expense. And most final expense buyers are age 60 to 75 and wouldn't qualify for decent rates on term policies. Term is a product for young and healthy people who are insuring temporary needs.

Final expense insurance is for a permanent need. And the need is a moving target for the rest of their life (due to inflation.)

[Newby]

Originally Posted by midwestbroker

Most FE plans are WL. I have been using Monumental Life since they have a 10 pay option (paid up at 10 years). However, Assurity has a lower graded benefit rates.

If they ask about term, I tell them about the 10 pay option, that way if they live past the term, they still get the DB.

Monumental also has the policy with 4% annual inflation protection with a 5-year or 10-year payment option. Great product. That's the one I have been selling along with Forethought and Homesteaders.

[David C]

Newby,

Do you know Tony Policastro with Homesteaders? I met him years ago down here in Georgia.

[Newby]

Originally Posted by David C

Newby,

Do you know Tony Policastro with Homesteaders? I met him years ago down here in Georgia.

No. I can't say that I know him. I haven't been with Homesteaders very long and haven't met many of their people yet.

[arnguy]

Newby, do you sell Final Expense as well as Pre-Need? When my buddy and I had a Forethought Agency in PA, we sold Forethought Pre-Need esclusively with a tie-in to the funeral homes. The Funeral Directors agreed to lock in the funeral price at today's price and any excess in the death benefit over and above that fixed cost would be paid to the beneficiaries. After my good friend's untimely death, the agency was closed because in PA only a person who is dually licensed (iInsurance and Funeral Director)may sell Pre-Need.

[Newby]

Originally Posted by arnguy

Newby, do you sell Final Expense as well as Pre-Need? When my buddy and I had a Forethought Agency in PA, we sold Forethought Pre-Need esclusively with a tie-in to the funeral homes. The Funeral Directors agreed to lock in the funeral price at today's price and any excess in the death benefit over and above that fixed cost would be paid to the beneficiaries. After my good friend's untimely death, the agency was closed because in PA only a person who is dually licensed (iInsurance and Funeral Director)may sell Pre-Need.

I have sold pre-need exclusively for about 12-years but have recently expanded into final-expense, term life, annuities, and med suppliments (if I can get a handle on the med sups.)

It all ties together very well because it is the same customer base.

Kentucky just tried to require a funeral director's license to sell pre-need but it got shot down. You just have to make clear that you are an insurance agent and the agreement is not in effect until signed by a funeral director (something I always did anyway.) It's real easy to become a funeral director in Kentucky anyway but I didn't really want to do it.

Those laws are bad because Funeral Directors as a rule know very little about life insurance OR funeral preplanning. And taking the time to become a director will not teach you what you need to know. There should be a separate license for funeral preplanning that directors as well as everyone else should have to achieve to do preplanning.

[arnguy]

Originally Posted by Newby

I have sold pre-need exclusively for about 12-years but have recently expanded into final-expense, term life, annuities, and med suppliments (if I can get a handle on the med sups.)

It all ties together very well because it is the same customer base.

Kentucky just tried to require a funeral director's license to sell pre-need but it got shot down. You just have to make clear that you are an insurance agent and the agreement is not in effect until signed by a funeral director (something I always did anyway.) It's real easy to become a funeral director in Kentucky anyway but I didn't really want to do it.

Those laws are bad because Funeral Directors as a rule know very little about life insurance OR funeral preplanning. And taking the time to become a director will not teach you what you need to know. There should be a separate license for funeral preplanning that directors as well as everyone else should have to achieve to do preplanning.

Newby, the law in PA shows you how powerful the Funeral Directors lobby is. Prior to the change in the law I sold pre-planning for the Stewart Corporation, the second largest death care business (cemeteries and funeral homes). SCI out of Texas is the largest. Agents had to learn all about the FTC regulations and the different hardware and services that funeral homes offer. I know some people in a Layton, Utah agency that sells Forethought pre-need. Interestingly, in Utah an insurance agent does not need a funeral directors license but must take a separate insurance exam in order to sell pre-need.

[Newby]

Originally Posted by arnguy

Newby, the law in PA shows you how powerful the Funeral Directors lobby is. Prior to the change in the law I sold pre-planning for the Stewart Corporation, the second largest death care business (cemeteries and funeral homes). SCI out of Texas is the largest. Agents had to learn all about the FTC regulations and the different hardware and services that funeral homes offer. I know some people in a Layton, Utah agency that sells Forethought pre-need. Interestingly, in Utah an insurance agent does not need a funeral directors license but must take a separate insurance exam in order to sell pre-need.

"in Utah an insurance agent does not need a funeral directors license but must take a separate insurance exam in order to sell pre-need"

That's the way it should be everywhere.

[arnguy]

Agreed!

[Yolanda]

hi there, took off my mortgage hat I have worn for several years, and put on my insurance hat, just getting started and I am Overwhelmed!!! I am interested in the senior market..specifically final expense pre need interests me as well, can anyone suggest any companies that I can plug into here in California that I can get my feet wet, and hopefully make some money?? Thanks for any and all suggestions, I do appreciate it..

[GreenSky]

Originally Posted by Yolanda

hi there, took off my mortgage hat I have worn for several years, and put on my insurance hat, just getting started and I am Overwhelmed!!! I am interested in the senior market..specifically final expense pre need interests me as well, can anyone suggest any companies that I can plug into here in California that I can get my feet wet, and hopefully make some money?? Thanks for any and all suggestions, I do appreciate it..

Where in California are you located?

As far as final expense companies, I just "discovered" Americo. The rates are very good and they don't have a point of sale verification phone call.

Great commissions as well.

Rick

[senior-advisor-indiana]

Originally Posted by GreenSky

Where in California are you located?

As far as final expense companies, I just "discovered" Americo. The rates are very good and they don't have a point of sale verification phone call.

Great commissions as well.

Rick

I thought Cristopher Colombus discovered Americo. I knew school was a waste of time.