Is there a philosophy of life insurance for 30-40 year olds? I know everyone's situation is different. Take for example a bread and butter family of three that owns their own house and both husband and wife have jobs making $75k per year total. They have no other life insurance and are in good health with medical benefits.
What would you consider to be good advice concerning life insurance for these people and what would you consider to be bad advice? I can present them with 10 year term that is convertible and 30 year ROP and whole life. But which, if any of these should I be recommending to people in this particular age group? And why?
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.
Do a needs analysis for them. How much income would you have to replace on each based on their currnet budget and individual incomes. Factor in mortgages and college education, etc. and come up with a number. Part of that number will go away when the kid is out of school and the mortgage is paid off. Put that amount in a term policy for the amount of time the money is needed. Take the rest of the money and put it in to a guaranteed UL. You can let them decide if they want to build cash value or not but if they have debt, I would say no to that. Also make sure the term is convertible in case they decide to remortgage their house/have another kid/have to work longer than they thought, etc.
Every agent will, of course, have their own philosophy about how to handle mom, dad and the 2.3 kids. If this were a democracy, I'd vote "none of the above" for the choices listed.
Most prospects' situtations are really similar, and not that different.
The primary purpose of Life Insurance is to replace lost future income. So, how does one lose income? You die. You become disabled (a Health product). Or, you retire.
It appears that you are focusing on Life Insurance only as a death benefit product. The insurance industry has done this for years. Guess what? It HAS to pay a death benefit. It's Life Insurance after all -- a legal contract that says, "You die...we pay". I treat the death benefit as a given.
Now the question becomes -- what else will your Life Insurance do for you while you're alive?
The answer is -- a properly structured Life Insurance program can up to double your spendable retirement income.
I phrase it this way:
The insurance industry believes, and trains its agents to believe, that you will die tomorrow -- and that somebody else needs the money.
On the other hand
I believe that you will probably die of old age, and that you just want to live better in the meantime -- while still taking care of your beneficiaries.
Which assumption would you like your finances to follow?
An additional side to the "equation" is all the people paying for additional Group Term Life. A great many if not most do, and think it's a "good deal". They have no idea what a road to nowhere they're on. Expaining the downside of GTL (not may upsides unless you're uninsurable) will get you some "found money" to help pay for a quality Life Insurance program that will come to their rescue when they lose future income through retirement.
Kyle, you handled the product side really well. I just tried to focus on the conceptual side of this equation.
Bitnis -- what we are saying is look at good fixed or indexed UL. Use Option 2, so customer can voluntarily overfund for tax-free income when they will need it the most. Odds of them dying before retiring is extremely small. Be sure it has a zero net cost wash loan, so they can cost-efficiently get back all the interest (basis returns tax-free, of course, because premiums were paid with after-tax dollars).
Put your customer in control, not the insurance company!
Then show em what you got. Explain the pros and cons of each choice as they look at them today and 30+ years from now.
To immediately dismiss any product offhand is unwise for an agent. If you don't explain it properly, somebody else will later and that guy will become their agent and you will be the guy that screwed them.
Have a full compliment of products to offer and most importantly LEARN how each one works.
As far as which is best, term, ul (in all it's forms) or whole life (stock or mutual), know how they work. Let the client decide which works best for them. Then you're an advisor, not a salesman.
Let me ad one closing thought...
I don't care what they choose as long as they choose it from me.
Life agents have been trained to think about a "product sale".
It has never been and never will be a "product sale".
Always be thinking STRATEGY. What is the strategy you want? How effective do you want that strategy to work for you? What is the budget available to implement that strategy?
Is there a philosophy of life insurance for 30-40 year olds? I know everyone's situation is different. Take for example a bread and butter family of three that owns their own house and both husband and wife have jobs making $75k per year total. They have no other life insurance and are in good health with medical benefits.
What would you consider to be good advice concerning life insurance for these people and what would you consider to be bad advice? I can present them with 10 year term that is convertible and 30 year ROP and whole life. But which, if any of these should I be recommending to people in this particular age group? And why?
Thank-you
How old are the kids?
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It's not a trick question: How old are the kids?
Last edited by Robert Barney : 10-23-2009 at 06:40 PM.
Reason: Posts merged
I'm torn in two directions. On one side I think the easiest way to get covered immediately is 10 year term with the option of conversion. If I'm not mistaken most people change or cancel within 8 years anyhow.
On the other hand, 20 or 30 year term with conversion is definitely more locked in security but more expensive.
In writing this my immediate thought is to present all options to the client and let them make the decision. That being said, what options are you offering your clients? ROP?
What happens if they can't afford the conversion of the 10-year term? Then you haven't solved the problem. For a 30-40 year old, the difference in cost between 10 year and 30 year term will be minimal. You can be cheap or you can do things right the first time. We currently have a $5 million case pending - previously had a 10 year policy, and a 10 year policy before that, both rated at preferred plus rates. Turns out he now has some issues that he wasn't aware of before and will be lucky to get a standard rate. A conversion on his old policy will cost approximately $40k per year in premium. He can afford that, but will he spend that much? Hard to jump from an expected $8k premium to $40k. He could have purchased a 20 or 30 year policy years ago and still been locked in instead of having the 10-year expiring and backed into a corner.
You need to know how old the kids are becauset that is part of the needs analysis. After the kids have graduated from college or moved out on their own the amount of insurance needed will be less.
If you want to go down that road, what is the remaining balance on the mortgage and how many years are left on it?Trying to read specific information into a generalized hypothetical situation just causes the discussion to drift away from its original purpose.
Now if the original poster wants to add variables to Dick and Jane Smith's needs then by all means let him. I'm sure we would all be able to lend our own brand of advise.
You need to know how old the kids are becauset that is part of the needs analysis. After the kids have graduated from college or moved out on their own the amount of insurance needed will be less.
If you want to go down that road, what is the remaining balance on the mortgage and how many years are left on it?Trying to read specific information into a generalized hypothetical situation just causes the discussion to drift away from its original purpose.
Now if the original poster wants to add variables to Dick and Jane Smith's needs then by all means let him. I'm sure we would all be able to lend our own brand of advise.
Everybody says that, but usually is not the case....unintended expenses come up, things change, etc. Those situations rarely work out the way the person expected 20 or 30 years earlier. It's much cheaper to lock it in at a young age than re-do everything when they're older and less healthy. I've seen the same scenario time and again.
Life Insurance for 30-40 Year Olds
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