I sold a couple an LTC and final expense policy, they want to buy level term on their two children a 3 year old and a 5 year old.
I rarely sell life so I told them I would check into it for them.
What is the best way for me to direct them on this? They want the policies to be on them till they are through with college.
I sold a couple an LTC and final expense policy, they want to buy level term on their two children a 3 year old and a 5 year old.
I rarely sell life so I told them I would check into it for them.
What is the best way for me to direct them on this? They want the policies to be on them till they are through with college.
Then what type of final expense policy did you sell?
First off - are the kids parents adequately insured? If not, look to insure the parents. You can add child rider coverage on both kids pretty cheap on the parent's policies.
Why do they needs coverage on the grandkids only through college? Theres no "income loss" to insure against. That being said, the only company I know of that writes term on kids (individual policy wise) is Genworth - $50k minimum face.
I sold a couple an LTC and final expense policy, they want to buy level term on their two children a 3 year old and a 5 year old.
I rarely sell life so I told them I would check into it for them.
What is the best way for me to direct them on this? They want the policies to be on them till they are through with college.
It's a relatively simple process. Most, as long as the children are healthy, just require paper apps and a doctors report.
I believe life insurance on children is vital. I know a child that died recently. My guess is his parents will not be working for a few months. They are devestated. Just getting up for the day is difficult. I can only imagine.
If the parents saw the value in a final expense policy for themselves I would think it would be easy to sell the final expense policy on the kids. The rates will never be cheaper. And the kids will have a policy that will continue to grow even if they quit paying premiums when the kids are in college. Just compare the final expense premium for the parent's versus the children. Same benefits vastly different cost.
Why not gently push them towards UL coverage? Permanent coverage starting at a young age will be incredibly cheap and give them a little cash value to tap when they need beer money in college. Check out North American's Builder IUL or Custom GrowthCV, both will provide great coverage at low cost.
If they're stuck on term, West Coast will issue non-med ages 0-14 under $300k.
True - ING will do but good luck convinng u/w of financial need (term coverage - 15 or 20 year) of $250k of coverage on a 3 and 5 year old.
You're better with a UL - better yet insure the parents.
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.
Then what type of final expense policy did you sell?
I sold a policy that was specific to a funeral parlor that locks in prices that was without an agent (they normally have an agent they work with) and threw me a bone.
I have never written a life policy on a child.
- - - - - - - - - - - - - - - - - -
Originally Posted by Pusher08
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.
After talking more with them they are leaning toward UL.
And you bring up a good point on the illness factor.
Last edited by IOA-MI : 08-11-2009 at 09:30 PM.
Reason: Posts merged
I have children aged 2, 4 and 6 so will offer some opinions from that perspective.
1) I agree with earlier posts that they should make sure the parents have adequate life insurance coverage, final expense insurance won't get the kids through college. Although I really believe in LTCi, life insurance was a higher priority for me than LTCi (although I do have the LTCi as well).
2) I don't really understand the concept of term insurance on young children. I think their permanent insurance needs are more important. For my two oldest, I have Pac Life Indexed UL, the primary purpose of which is permanent insurance, the second benefit is accumulation of savings. I had intended to set aside $100 per month in mutual funds for each child, but with this we get the permanent insurance and don't have to worry about kiddie tax filings every year. We have had the Pac Life policies for a year and I am very happy with the value accumulation.
I am currently looking at the Lincoln Benefit and North American (previously mentioned) indexed products for my youngest.
For me, these policies represent current savings, and if I never need to cash in on the value, I can gift them a pretty nice policy when they are of age.
It makes to have some permanent coverage on children. They could easily become uninsurable before they hit the insurance buying age. I tend to look at $100K for these policies.
Posts recommending UL are right on. Be sure to use a top-rated company, and do an Option 2, so they can overfund later in life for tax-free income. It beats the heck out of funding a qualified plan beyond the employer match. Will give them about double the spendable income -- assuming congress doesn't change the rules. All the more reason to do this now, because congress has always "grandfathered" in the past. Hopefully, that won't change going forward!
My vote goes toward permanent insurance as well. It will never be cheaper than when the children are young and they can carry it and overfund it forever. Its a nice way to get them situated for later in life.
I don't know any company that won't issue at least 100K for a healthy child in a UL. Funerals cost upwards of $10K and the parent can consider themselves out of work for many months and they will probably need counseling and other stuff. $100K doesn't go as far as you think it does. It won't be hard proving the need on that one.
------------------------------------
I am proud to have voted for Ron Paul.
If you decide to use a UL which seems the consensus here, be sure it has a "wash loan"/zero net-cost loan. I forgot to mention that earlier. Now, these kids will have a cost-efficient way to get the money back years from now. Compare to a WL 8% "gross loan". Why would you want to pay 8% to get the money back, when you can pay 0%? You will be helping them buy guaranteed lifetime coverage with ALL the tax benefits associated with Life Insurance. Good skill (luck has little to do with it).
If you decide to use a UL which seems the consensus here, be sure it has a "wash loan"/zero net-cost loan. I forgot to mention that earlier. Now, these kids will have a cost-efficient way to get the money back years from now. Compare to a WL 8% "gross loan". Why would you want to pay 8% to get the money back, when you can pay 0%? You will be helping them buy guaranteed lifetime coverage with ALL the tax benefits associated with Life Insurance. Good skill (luck has little to do with it).
Atlantainsguy
Let's think this through for a second. The Ins company charges you interest to borrow money from a WL. Basically to keep the policy going as if the money wasn't borrowed. Now, you say there is a UL that will let you borrow money from the policy with no real cost?
Trust me, insurance companies aren't stupid. It may appear that their is no cost, but there most definitely is. It wouldn't surprise me if the "true cost" of borrowing from that type of UL isn't actually higher than borrowing from a WL.
Trust me, insurance companies aren't stupid. It may appear that their is no cost, but there most definitely is. It wouldn't surprise me if the "true cost" of borrowing from that type of UL isn't actually higher than borrowing from a WL.
Free lunches are only found in mouse traps! Many UL policies do offer zero net loans, so why doesn't WL as well? With a WL policy, the company is contractually obligated to keep the death benefit inforce as long as you pay your premiums. If you take out a loan, the insurance company loses part of it's cash value base to invest and honor it's obligation, hence the loan interest.
With UL policies, think of it like a pool of money in which the rising cost of insurance is deducted out each month. If the pool of money is less than the insurance charge, the policy lapses. That's why the UL company is willing to loan out the money at zero interest, they have no skin in the game. If they money you take out of the pool causes the pool to run out in later years, the insurance company doesn't care, in fact they just got off the hook from having to potentially pay a large death benefit.
I agree with many of the comments already given. Considering that there is nearly a 100% chance of the child having expenses in their future (education, etc) and a statistically minimal chance of them passing away I see no logic whatsoever to writing term on children. As someone said, what (other than grief-related absence from work) financial loss is there to insure for?
With a guaranteed insurability rider (if not part of the policy) permanent would provide the child with ability to purchase more insurance even if a health problem or other issue popped up before taking over the policy. Plus, assignment of the policy at 21 or so would provide a vehicle to borrow against the cash value. Again...think, education...the statistically more likely outcome.
With UL policies, think of it like a pool of money in which the rising cost of insurance is deducted out each month. If the pool of money is less than the insurance charge, the policy lapses. That's why the UL company is willing to loan out the money at zero interest, they have no skin in the game. If they money you take out of the pool causes the pool to run out in later years, the insurance company doesn't care, in fact they just got off the hook from having to potentially pay a large death benefit.
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.
Life on Children?
Linear Mode
