Insurance Agent Forum

[Robert Barney]

OK, here is an example I used all the time in the dark ages when I actually sold life insurance.

When talking to a husband and wife with kids, I would say:

Can we agree that if Bill dies (Bill would be the husband), Carol's problem (Carol would be the wife) is that she has lost Bill's paycheck?

I never got an argument on that. I would then say,

Can I ask how much Bill makes a year (roughly)?

They would tell me the amount. For this example let's use $40,000 per year. I would then say,

OK, so if I can come up with $40,000 a year for Carol, does that solve the money problem if Bill dies?

Funny thing, I never got an argument on that either. Then I would ask:

How old is your youngest child?

They would tell me, let's assume 3. I would then say:

So let's assume that the least amount of money Carol is going to need is $40,000 per year until the youngest is 23 and out of the house, say 20 years. Does that sound about right?

Now keep in mind I only got an argument from one guy on this needs analysis strategy. His view was that if he was dead, it wasn't his problem anymore and his wife looked good enough and she would get remarried. I then asked him if he thought she was that marketable given she was stuck with his kids, and he said that was her problem. Now I don't care what needs analysis you're going to use on him, you just thank him for his time and leave.

But back to the example. Apart from him, I never got an argument from anyone about the replacing the income until the kids were out of the house. Once they agreed to the strategy, I just pulled out my laptop and did the following income analysis and showed it to them. It is attached as a PDF file.

Important: Do not show them the schedule until they have agreed to the strategy.

I would then focus on explaining the schedule, showing the first year coming out of the capital, and the balance earning interest. I would then explain how the second year income was larger than the first year to deal with inflation.

When you get to the last year, and show them all the money is gone, they usually asked:

But then what happens?

I would politely say:

Carol can get a job and go to work.

If they didn't like the answer, I would just extend how long the income would be needed, usually to Bill's age 65.

Do you know why I had the income end at Bill's age 65?

But needless to say, Bill and Carol were pretty sure they needed $616,000 of insurance, just to get the kids raised to adults. And there was no way that Bill was going to convince Carol that she needed less. And you can't imagine how relieved they were to find out how little it cost to buy $616,000 of term life insurance after I showed them a comparison of term rates on my laptop.

THAT is why the age of the kids, and the youngest kid, is VERY, VERY important.

Unless you only want to sell them a $250,000 term policy and have them think that Bill was worth more dead than alive.

[LGilmore]

"You need to know how old the kids are becauset that is part of the needs analysis"

That why most of us said "do a needs analysis." Because yes, kids are a part of that. Some of us start with an assumption that the agent has a basic understanding of why he/she is there with some level of insurance intelligence.

I also agree with Golden, as the vast bulk of my client are people within a single hand count of retirement years. Yet they are trying to buy big policies with basically s hitty health. I have about 8 type II's in the mill right now.

The reasons for such large purchases in the their golden years are many..some penison max, others new marriages, others about to retire "RED". Retiring "RED" is when you still have a mortgage and debt at 65. Guess what, most people aren't downsizing homes, they're buying upward. People are requesting 500k to 750k to cover mortgages when they should be debt free. It's a far different world than we've been led to believe.
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"Carol can get a job and go to work. "

Did you lose the additional Carol Sale, or does she lack value?

How much is Bill going to pay somebody to wipe his 3 year old's backside while he's working?

[Robert Barney]

I always sold insurance on Carol. If she worked outside the home, we replaced her income. If she was a homemaker I would emphasize that Bill may not pay her very well, but he wasn't going to get all the work that Carol did at home for free. Usually, on the homemaker, the sale was about 1/2 of what we put on Bill.

You see, once they realize why you need $600,000 on Bill, it's hard to imagine why they think $100,000 on Carol would be enough. I would emphasize at least $250,000 to take advantage of the savings offered by premium banding.

On a side note, you seem a little sarcastic about the methodology. With that in mind, I have this question for you:

How much life insurance do you usually sell to cover a young family man with $40,000 per year in income? Would you say your average sale was more or less than that $600,000?

Now be honest because if you are selling more than $600,000 I would like you to explain how you are doing it.

And of course if it's less than $600,000, it's my position you are underinsuring your clients meaning I really don't care how sophisticated your needs analysis is - it's not getting the job done.

Until and Unless your children will become mature enough...

[Robert Barney]

Everybody's kids get mature enough. I don't get your point.

[LGilmore]

"And of course if it's less than $600,000, it's my position you are underinsuring your clients meaning I really don't care how sophisticated your needs analysis is - it's not getting the job done."

Robert, my sarcasim is roughly proportionate to your arrogance... You seem to see alot about others but less yourself sport.

[Robert Barney]

Originally Posted by LGilmore

"And of course if it's less than $600,000, it's my position you are underinsuring your clients meaning I really don't care how sophisticated your needs analysis is - it's not getting the job done."

Robert, my sarcasim is roughly proportionate to your arrogance... You seem to see alot about others but less yourself sport.

None of which really addresses the issue.

I happen to believe that most people are underinsured. You and I both know that is true. It is a chronic problem. Do you disagree? If I am right, and you know I am, what's the problem? The problem is that the average consumer does not understand the relationship between a lump sum of money and the income that the lump sum can produce.

Agents should be educating consumers on the subject, and most don't understand it themselves. And that doesn't make make me happy knowing that there are widows and children who are ending up in dire economic circumstances because a life insurance agent did a bad job.

I write for a publication called Canadian MoneySaver. Here are some articles that I have written on this subject in the past:

http://www.term4sale.com/moreinfo.htm

[LGilmore]

Robert, read your stuff. disagree with your pov about whole life. don't want to get into a pissing match as neither of us will change our minds about our positions. Just be thankful that there is a client for you and me out there everyday.

[ticker_shuffle]

Originally Posted by KyleLancaster

Sounds like a pretty easy sell for an indexed UL...

The key with a situation like that is the future, unless the reason for the insurance is an immediate/short term need like a business loan.

As far as recommended products, NACOLA has their Builder IUL that I like a lot. It has guaranteed minimums that beat cd's for cash value, and right now they are getting 8% (that is not the minimum).

Being someone that is pretty near the demographic you listed, that is the type of a product I would write for myself.

What kind of management costs, in percentage of premium, is tied to that type of UL?

[carroll]

20-30 year term......enought to cover all debts including kids college, plus one million.....thats what I usually recomend.....the surving spouse will be debt free with one million.......that is the amount my wife and I have on each other.

[Winter]

Originally Posted by LGilmore

figure out the need first.

.

Indeed, not only the need, but what they perceive as the need. I always see several good reasons why the client needs insurance but which never occurred to them. However, what is the means of contact with the client. If you told them that you are in the insurance business and they said you can come over and talk because you know them from church, then that is one thing. If, however, the prospect took even a meager step toward contacting someone about insurance, why was that? Find that out first and then build upon it.

Also, the amount of insurance "needed" is always going to be tempered by the amount that is affordable. Somewhere in the middle is the right answer. I would always be doing fact finding about their insurability rather than assuming that just because they are youngish that everything is preferred- it isn't. You often/usually have a DUI, bipolar, smoking, diabetes that is controlled but set in at a young age, overweight, family history issues, etc looming in the background somewhere. Maybe not this couple, then the next. If you are working up a quote, it is based on what? If they are younger and have issues and you know that you usually can still navigate it by demonstrating that you have found a good rate by working with those things that in their favor etc. Otherwise, you quote them preferred and they perceive you as explaining why the carrier determined that they are a loser. Sometimes anyway.