Scroll down for a discussion on Life on Children? within the Life Insurance Forum.
Twin Cities...and I wouldn't have it any other way!
Myself as well, north metro. Heading down to Canterbury shortly, then over to Burnsville for some ...
Original poster, IOA-MI, was fishing for ideas. IOA-MI will sort-out our opinions from facts I'm sure. Some agents like UL, some don't -- and am sure this discussion will help the poster. It's also nice that this is civil.
I was expanding the reasons why I (and others it seems) think UL is a better idea than WL or Term for these kids, let alone some table 4-6 FE.
Assumption is that the policy initially runs at minimum premium to guarantee coverage to age 100. Of course, it could just go this way for life, and would then be a term to 100 with cheaper renewal rates (UL vs. ART). You could pay more money and would run like WL. Either way, it's guaranteed.
My point was that the insured can overfund to GLL each year, or all at once years later if they want. The ratio of minimum to GLL is pretty high at young ages. The ability to overfund, but not the obligation, is one of the benefits of the flexible UL policy design. WL is inflexible by design.
Once overfunded years later -- now how will the money be distributed? That's where the wash loan becomes important. Of course, any policy will crash and burn if you take out too much CV. That's not what's being said or advocated.
It's takes periodic service to make sure things like mentioned in a few previous posts don't happen. It also takes periodic client "re-education" to help maintain understanding and appreciation of a quality UL. Of course, these reviews are good opportunities to get more referrals. But, UL isn't for every prospect or agent. It takes more time and effort, but is generally better for the customer in both the sort and long run. Mr. and Ms. customer -- do you want to pay the least amount possible, or the highest amount possible -- for the same thing?
With UL, the customer owns the money. WL, the company owns the money. Getting the money back is a transfer of capital in both cases, not a realization of income. So, what's the most cost-efficient way to get the money back? I was simply comparing the relative cost-efficiency of a wash loan, to a 2%-4% net loan, to an 8% WL gross.
If the poster decides to go the Option 2 UL route, it's important to consider how the customer gets the overfunded money back years later. That was my point -- not suggesting that the policy CV get sucked dry.
So now you've put the child on the hook for ever increasing premiums to keep the policy alive, or face a massive tax bill. Somehow that isn't a gift I'd like to leave my son one day.
Clearly one should not strip the policy of all the value and gift a policy that is about to implode and shower a kid with taxable income but no cash.
Whether this is the outcome will depend on the remaining value in the policy, the return on that value and the cost of insurance and other charges at the time that the loan and transfer are made.
Impossible to predict 16 or 18 years out, but those factors will be pretty transparent at the time.
All-in-all I prefer the transparency of the indexed ul computation to the black box computation that is whole life. Every month I can see the exact allocations to each of my boy's policies.
I know a whole lot of agents prefer whole life to indexed ul, but the reality is the cost/profit factors to the insurance companies are pretty much the same for both products, except that a portion of the amount that a whole life policy would invest in fixed instruments is used to buy an option on the index. That is the area of biggest risk and potential reward I see in indexed UL and it will take a few years to really get a good idea how that will turn out.
There is no magic to either product, but with UL, you can see what is happening and make changes if you don't like where it is going.
If you have a relatively low surrender charge, you can always bail to a more favorable product if the UL isn't doing what it is supposed to.
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I have a technical question that I some of the more experienced agents might be able to help me with.
Pac Life and Lincoln Benefit appear to allow you use a juvenile rating (which seems to be a preferred rating), but the policies require additional u/w at 18 or so to keep that preferred rating.
When I run North American projections for a child (and at this point I haven't seen the sample policy) they only allow me to project standard, and if there is anything in the illustration indicating additional u/w is required or allowed at 18, I have missed it.
I am going to try to get a cost schedule on the NA projections so I can try to get some idea of what this does to the cost of insurance in later years assuming the rating stays at standard.
It would seem that the Pac Life and LBL approach is riskier - theoretically you could get stuck with a rating worse than standard at 18 or so (but you would still have insurance).
The standard rating with North American doesn't seem that great, but if at 18 the new adult is still in good health (and has a good driving record), they could always get a new policy at the preferred rates, which they would do if the preferred rates at that time made up for the additional charges you would experience with a new policy.
Any suggestions or observations would be appreciated.
Last edited by dlvhi : 08-17-2009 at 12:02 AM.
Reason: Posts merged
My MA came back with a Genworth Lifetime Flex Plus II policy for both the children...any of you sell this product or have experience with it?
Thanks for all the responses.
That's the exact one I've used several times. Clients have been happy with the premiums and the guarantee.
I haven't sold it since their Comdex rating dropped below 80. Genworth should be fine though. I imagine some other agents here can shed more light on them.
Thanks for this thoughtful, fine essay about parenting, and especially about parenting young girls.Some parents like to have their children as helpless, ignorant, and incapable as possible for as long as possible.Thanks for your excellent responses.
Thanks for this thoughtful, fine essay about parenting, and especially about parenting young girls.Some parents like to have their children as helpless, ignorant, and incapable as possible for as long as possible.Thanks for your excellent responses.
I like the arguments presented in this thread! Keep on posting.
Don't read the rest of this post unless you care to hear about my thoughts on cold weather...it has nothing to do with insurance...AT ALL.
The coldest I have ever been in my entire life was in Minneapolis in January of 1989. I was there for a week long training with Prudential Life. While I was there, the oil in my car literally froze and my car would not start until the heat of the day which was around 18 degrees. Further, my nostril hairs didn't thaw until I hit the state line...on my way back to "Southern Michigan".
This is only one of the reasons I am a happy to be a resident of Naples, FL for the last 20 plus years.
Just writing this I am getting cold and I am sitting outside in 83 degrees at 92% humidity. How do you do it up there???
I personally don't like to write term riders on children. You have to think they will have this coverage for the rest of their life and will eventually take ownership of the policy. So separate policies on each child is the way i prefer to go. Just in case they develop diabetes or cancer and can't qualify later in life.
Before I ask this question, keep in mind I am relatively new to the insurance industry.
According to the post quoted above CIR's are not guaranteed renewable once the child reaches insurable age. Is this correct? I was always under the assumption that they were.
I wrote Gerber Life on both my children. Simple, cheap whole life.
Honestly, with so many companies out there, why go with Gerber?
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Originally Posted by rgrace
Before I ask this question, keep in mind I am relatively new to the insurance industry.
According to the post quoted above CIR's are not guaranteed renewable once the child reaches insurable age. Is this correct? I was always under the assumption that they were.
It all depends on the contract. Check it and see what it says. If you are thinking about writing one, call the HO and see what they say, then ask them to show you where it is in writing.
Last edited by VolAgent : 10-16-2009 at 10:24 PM.
Reason: Posts merged
Before I ask this question, keep in mind I am relatively new to the insurance industry.
According to the post quoted above CIR's are not guaranteed renewable once the child reaches insurable age. Is this correct? I was always under the assumption that they were.
Most are convertible to a permanent policy, many time at @ 5 times the face, at age 25. Example. 20,000 CIR . Child turns 25 can convert to $100,000 of Wl or UL non med guaranteed Std issue.
"It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is the most adaptable to change." Charles Darwin
Most are convertible to a permanent policy, many time at @ 5 times the face, at age 25. Example. 20,000 CIR . Child turns 25 can convert to $100,000 of Wl or UL non med guaranteed Std issue.
So if this is the case, what would be the benefit of writing a separate policy for each child?
So if this is the case, what would be the benefit of writing a separate policy for each child?
What if it is not convertible? What if the parent on which the policy is written dies and the children have become ill? Can the rider be continued on and converted, or does the policy and rider go away with the primary? What if the primary later decides to drop the policy, what happens to the rider then? What if the parents get divorced, and the primary turns out to be a dead-beat who lets the policy lapse?
Too many what ifs. Insurance is about managing risk and handling what ifs, not about creating more.
What if the parent dies and the child rider is convertible or becomes paid up, like most are. What if the owner of a individual policy dies? Lapses? Surrenders?
What if it is convertible and the child developes Type 1 diabetes and wants/needs coverage as a young married dad?
And as important, if I go in the house. the other guys is showing individual policies for more than 1 child. I get paid, he does not.
Originally Posted by VolAgent
What if it is not convertible? What if the parent on which the policy is written dies and the children have become ill? Can the rider be continued on and converted, or does the policy and rider go away with the primary? What if the primary later decides to drop the policy, what happens to the rider then? What if the parents get divorced, and the primary turns out to be a dead-beat who lets the policy lapse?
Too many what ifs. Insurance is about managing risk and handling what ifs, not about creating more.
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There are strong argument to doing child riders and equally for writing individual policies.
Now there are a lot of really good(and competitive) agents on here, so others will have other ways of doing this also.<feeble attempt at flame proofing>
Here is one example for the child rider.
Client = Male age 30 pfd NT, 3 boys 5,8,10,
Opt A) Let's write a age 121 ul for $250,000 With $165 disability rider bene on Dad = $1,011 -Protective Life. If I write the kids individual WL policies. Cost is $182,$199,$212 total of $593.00 per year - Ohio National. Total for all is $1,640 per year or around $140 per month
Opt B) The other way - Same $250,000 UL on Dad. Add the boys for $20,000 to age 25= $1,107 or about $97 per month.
Now if someone has already proposed the plan A and they are OK with the premium. I increase Dad to $360,000 for a couple dollars less. and explain how much more the ADB would be. Or I leave dad the same and add a large twenty year convertible term to get the boys grown. Or cover Mom with the extra money.
I belive that it is more important to max insure the bread winner. Also I have converted Many kids that would be declined for regular policies, At 5 times the original face. One was in a coma. Or had clients that have had children born with severe birth defects that are automatically covered(after 15 days) That are guaranteed conversion Xs 5.
Originally Posted by rgrace
So if this is the case, what would be the benefit of writing a separate policy for each child?
Last edited by WinoBlues : 10-17-2009 at 05:09 AM.
Reason: Posts merged
Obviously you've done a good job of picking the right carrier and policy to handle many of the what ifs. And that was the point, what does the policy say. If it can take care of most of those issues, then there is nothing necessarily wrong with a child rider.
We agree. There are a lot of ways to do the job we do. We can never cover all the what ifs. Just imagine ~if~ we agents did not do this. Damn, we need a freaken Statue!
Originally Posted by VolAgent
Obviously you've done a good job of picking the right carrier and policy to handle many of the what ifs. And that was the point, what does the policy say. If it can take care of most of those issues, then there is nothing necessarily wrong with a child rider.
Re: Life on Children?
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