Insurance Agent Forum

[moonlightandmargaritas]

Originally Posted by arnguy

Excellent advice, STI. Give the client what they want to buy, not what you want to sell them!

This is not the way true advisors think.

This is the way salespeople think.

[STIBROKER@AUSTIN.RR.COM]

No thats how an insurance agent think....

Originally Posted by moonlightandmargaritas

This is not the way true advisors think.
This is the way salespeople think.

See.... there you are again....you can not see the forest because of the trees...Its not about income replacement in this case.....whats going to last a life time is the child being taught about life insurance by their parents....

Originally Posted by moonlightandmargaritas

Death benefit that will last the life of the child?
What kind of income does $50,000 in db replace?

[David C]

Great point Sti, I think lots of agents lose sales by trying to sell the client what they want to sell them, not what the client wants. Clients will find an agent to sell them what they want to buy.

Who among us would not be pleased if upon marriage our parents had given us a 100,000 WL policy that we could take over for a premium of 45.53 a month??? Said policy, utilizing dividends to PUA's would have a death benefit at age 65 of from 220,000 to 281,000. Yes, I know that dividends are not guaranteed.

Edited by David C. Said policy issued at age 1, male.

[STIBROKER@AUSTIN.RR.COM]

Or even paying the prem. thru the dividends....taboo to use paid up policy's these days....

Originally Posted by David C

that we could take over for a premium of 45.53 a month???

[Agent]

Originally Posted by moonlightandmargaritas

Great, let's analyze this...

If you're concerned about burial expenses/grieving fund, you can purchase a kiddie rider on your own policy for what - $5.00 a month?

That leaves you $50/month to invest. At college time (16 years) at 8% average annual return, you have $19,489.53.

What's the cash value?

And what happens when the anticipated "average" return is an actual negative return the year the child needs to pay tuition? Should the kid withdraw less for tuition the next year to make up for the short fall in the ROR? Would the college be on board with reducing the tuition to accommodate the kids market issues?

Not only is funding a child's college though a market/equity position dangerous because of the almost guaranteed ACTUAL declines in the market (and thereby decline in the cash flow for tuition). But if you look at a compounding chart for a growth investment - you will be withdrawing the money right before the account would experience some of the largest increases it can participate in (doubling of money ie.. Rule of 72). That makes a whole lot of sense!

IMHO, parWL will be far more advantageous for the child for reasons that have been listed. In addition, I believe it is superior to use to fund a child's college. This is because, in part, if you use a company that has Non-direct Recognition of loans, the CV will continue to grow as if you had never took the money out for college. MF's do that? - Protected from creditors? - Carry a Net Death Benefit? - Tax free? etc....

Here's a question for you; If you do not find WL worth it to have on a child to protect their insurability because of the statistical improbability of the child facing that problem. Do you/will you not sell term insurance because of it's statistical improbability of the insured ever using/realizing the benefit? (less the 1% of all term policies will ever pay a death benefit)? Just seeing if you are consistent in your premises.

Agent

[Newby]

Comming from the perspective of an agent who has worked in funeral homes for the last 12-years, I cringe when I hear "experts" say you don't need insurance on your kids.

It's not for future insurability although that's a good feature.

It's not for final expenses...although that's VERY important at the time of the highest grief.

It's because I've never seen parents who lost a child on Wensday who were ready to go back to work on Monday. Many are forced to. And many are emotionally wrecked and need to take some time away but can't.

I've worked with MANY families who really have lost a child. And if they have the LUXURY of not having a financial burden on top of their loss it's a blessing.

Yes, the odds say you won't lose your child at a young age. That's why that kind of insurance is so cheap. I recommend it.

[moonlightandmargaritas]

Wow, finally some non "emotional" viewpoints, other than the crap that the big life insurance companies hand out (and I worked for two of 'em)!

My hat's off to you. Let's look at them in-depth...

Originally Posted by Agent

And what happens when the anticipated "average" return is an actual negative return the year the child needs to pay tuition? Should the kid withdraw less for tuition the next year to make up for the short fall in the ROR? Would the college be on board with reducing the tuition to accommodate the kids market issues?

Even if you lost half, you'd still have more than what the cash value would be. Should you make a move to less volatility as the time draws near to use the money? Of course you should.

Not only is funding a child's college though a market/equity position dangerous because of the almost guaranteed ACTUAL declines in the market (and thereby decline in the cash flow for tuition). But if you look at a compounding chart for a growth investment - you will be withdrawing the money right before the account would experience some of the largest increases it can participate in (doubling of money ie.. Rule of 72). That makes a whole lot of sense!

If you went to the bank and applied for a loan, secured by the account, don't you think you'd get it?

IMHO, parWL will be far more advantageous for the child for reasons that have been listed. In addition, I believe it is superior to use to fund a child's college. This is because, in part, if you use a company that has Non-direct Recognition of loans, the CV will continue to grow as if you had never took the money out for college. MF's do that? - Protected from creditors? - Carry a Net Death Benefit? - Tax free? etc....

Although not an education funding expert, I believe these 529 tuition plans ARE in fact creditor protected. What difference does it make if it's taxable or not? You can pay the tax (at the childs lower rate) and still come out net ahead of the cash value!

Here's a question for you; If you do not find WL worth it to have on a child to protect their insurability because of the statistical improbability of the child facing that problem. Do you/will you not sell term insurance because of it's statistical improbability of the insured ever using/realizing the benefit? (less the 1% of all term policies will ever pay a death benefit)? Just seeing if you are consistent in your premises.

Agent

No, not at all. Buy a kiddie rider - and invest the difference. Aren't kiddie riders convertible when the child reaches a certain age?

Life insurance is a great product - as life insurance. As an accumulation vehicle, due to the inherent charges - not so good versus other things you can do.

[STIBROKER@AUSTIN.RR.COM]

Man.....you are still missing the point.....you might be missing sales for being one sided....just a thought....please tell us what you know about convertible....

Originally Posted by moonlightandmargaritas

Wow, finally some non "emotional" viewpoints.No, not at all. Buy a kiddie rider - and invest the difference. Aren't kiddie riders convertible when the child reaches a certain age?

Life insurance is a great product - as life insurance. As an accumulation vehicle, due to the inherent charges - not so good versus other things you can do.

[moonlightandmargaritas]

Originally Posted by STIBROKER@AUSTIN.RR.COM

.....you might be missing sales for being one sided....just a thought....

Actually Scott, I started in the biz with life insurance...working a debit with Pru. Have also worked for Guardian, and also did a stint as a life insurance wholesaler.

Even though it's not my main focus, I still write a fair amount of life apps, mainly high face amounts of term insurance - cuz I'm dealing almost exclusively with business owners.

I've delivered a good amount of death claims. Not a single beneficiary (isn't that who it's for?) has ever asked me what type of policy it was. If I had a choice, I'd rather be delivering a $300,000 check from a term policy - than a $75,000 check from a whole life policy.

[STIBROKER@AUSTIN.RR.COM]

So did I with mother met.......but this discussion is not about you....it is ...What are the reasons for life insurance on children......your point is.....

Originally Posted by moonlightandmargaritas

Actually Scott, I started in the biz with life insurance...working a debit with Pru. Have also worked for Guardian, and also did a stint as a life insurance wholesaler.

Even though it's not my main focus, I still write a fair amount of life apps, mainly high face amounts of term insurance - cuz I'm dealing almost exclusively with business owners.

now if my client does their job right I will be writing this policy on their kids (but most likely it will be a mill. plus because that is my avg. on adults)...along with a paid up $50,000 WL....most life policy's that are written on young couples are by their parents life agent.....

Originally Posted by moonlightandmargaritas

If I had a choice, I'd rather be delivering a $300,000 check from a term policy - than a $75,000 check from a whole life policy.

[Agent]

The one aspect that has great difference in our outcomes that yourself, and many others ignore is the opportunity cost. When you loose a dollar you not only loose that dollar but what they dollar could have earned you had you instead invested it. The interest you lost is the opportunity cost.

Even if you lost half, you'd still have more than what the cash value would be. Should you make a move to less volatility as the time draws near to use the money? Of course you should.

Unless you fund the policy just below the mec limit. Then you would be very, very wrong. In addition, what is the total cost on the term premiums paid out and the interest that you lost on those premiums? Taxes plus the interest you lost on them? Subtract that from the realized return and you are on the loosing side.

You also are not recognizing/addressing the loss of a greater ROR by repositioning to a more conservative investment at the time of withdrawal.

If you went to the bank and applied for a loan, secured by the account, don't you think you'd get it?

So, do you agree that withdrawing from the growth account would be a losers bet?

If the only purpose for the growth account as it relates to college funding, is to use it as collateral could not other financial instruments be used to secure the loan. Also, what is the interest you have to pay to the bank and the interest at interest you will loose? And yes there is interest on a policy loan however, you can all but make that a mute point with some other strategies used in conjunction with the policy (I'm not going to say what because that would give to much of my strategies away...and I'm not going to do so on a public forum).

BTW, not entirely sure in todays market that a bank would be that interested in taking a variable account as collateral. They love to use the guarantees of WL however.

Although not an education funding expert, I believe these 529 tuition plans ARE in fact creditor protected. What difference does it make if it's taxable or not? You can pay the tax (at the childs lower rate) and still come out net ahead of the cash value!

Your missing the point, and if you do use the 529 are you not committing yourself, or at least someone in your family in having to use the funds from the 529 plan? Thereby, forfeiting the higher returns (rule of 72) you would be getting if left in the account undisturbed? This also contradicts the whole bank loan approach mentioned above. Taxes matter, they reduce available funds and loose the interest you could have earned on those taxes, be them low or not.

Agent No, not at all. Buy a kiddie rider - and invest the difference. Aren't kiddie riders convertible when the child reaches a certain age?

Why not by a moped and invest the difference? Because it's not all about ROR! What does WL give me that MF/growth stock do not, a whole lot! I do not believe you can convert a rider into a personally owned PLI policy.

Life insurance is a great product - as life insurance. As an accumulation vehicle, due to the inherent charges - not so good versus other things you can do.

Now here is where we agree. Who said that WL, in terms of IRR, can beat a growth stock MF? I know I didn't. Ever heard a reputable agent/financial advisor say this? Anyone on this board? Me neither. And yet this is the drum beat I hear from BTITD crowd. As if it were ever a point of contention.

What are the Insurance companies invested in by in large? Growth products? NO. What underlines the WL crediting rate, the investments are in bonds, loans etc. Not equity stocks. So why would one compare what is truly a savings vehicle (WL), which is basically bonds to a growth stock MF? This is an apples to oranges comparison which is only made by the term invest the difference folks.

Thank you for your comments about my answer however, I give great consideration to my clients wants as well (which are usually always driven by emotion). And I would say more so then their "needs". If my client lost a child and could not go to work for several days because perhaps the mother survived but remains in hospital care, or because of distraught, where do you think he would be? I know where I would be. And I also know what a financial impact that can have on ones immediate income as well as their investment plan and that plans ultimate ROR.

Also, I imagine the children will not question their Dad when he signs the policy over to them why he didn't just by term and invest the difference.

[moonlightandmargaritas]

OK, I've been thinkin' about this today...

We've had all kinds of "big mutual life insurance company propaganda" type obfuscation from the whole life fans...MEC/non-MEC, creditor proof, tax-free, lost opportunity cost (you must have had LEAP?)...

...but yet nobody has QUANTIFIED it yet.

If you put $55 per month into a whole life policy for a 2 year old with a $50,000 death benefit, what's the cash value at age 18? You don't even have to give the guarantee, nor should you give the projected cash value...a midpoint would seem about right...

Anybody?

[STIBROKER@AUSTIN.RR.COM]

My clients bought it to give their kids a policy when they get married....can you not wrap your brain around that.....thats whats wrong with life insurance advisers these days ...its all about the dollar.....

Originally Posted by moonlightandmargaritas

O
...but yet nobody has QUANTIFIED it yet.

[djs]

Originally Posted by moonlightandmargaritas

OK, I've been thinkin' about this today...

We've had all kinds of "big mutual life insurance company propaganda" type obfuscation from the whole life fans...MEC/non-MEC, creditor proof, tax-free, lost opportunity cost (you must have had LEAP?)...

...but yet nobody has QUANTIFIED it yet.

If you put $55 per month into a whole life policy for a 2 year old with a $50,000 death benefit, what's the cash value at age 18? You don't even have to give the guarantee, nor should you give the projected cash value...a midpoint would seem about right...

Anybody?

Okay, but if they die at age 4, what is the death benefit of the investment to the family?

You are trying desperately to compare totally different things, and then trying to prove they aren't the same thing. Everyone else has already realized investments are different from life insurance. We get that. Now realize there are 3 reasons to buy life insurance on a child. You may not agree with any of them.

Reason 1:
Guaranteed insurability. If you can ever get insurance, it will be when you are young. Many companies offer a way to step up the death benefit, guaranteed, at selected life events. Given the number of diseases that happen, get coverage while you can.

Reason 2:
You might die. Okay, this is a slim chance, but it does happen. It would be nice if mom and dad could afford to take some time off work, deal with the final expenses without pulling food off the table, etc. It's insurance, so we all know that we hope we don't use it. When was the last time you bought insurance and hoped you collected (blackjack insurance when you have a 15 and the dealer has an ACE doesn't count)

Reason 3:
Stability. Right or wrong, the cash value in a permanent policy offers some stability to a person as they mature. If needbe, they can get a policy loan in their 20's or 30's to get them through a rough spot. People will easily pull money out of savings, but it takes a bit to get it from your life policy, slowing down the impulse buying solution, and making it more of a true reserve. Whether this is used for college, home purchase, or to fix a car is somewhat irrelavant, since it will likely be there for those types of things, if truly needed.

Please note, that tax advantages (outside of the death benefit) are pretty much irrelavent on a juvi policy.

There are 2 reasons to not buy life insurance on children.

Reason 1:
You insure assets, not liabilities. Financially speaking, children are a liability. As cold as it sounds, families will be better off financially in the long run without kids. Please don't try to explain this to a parent, it's true, but they buy on emotion, not finances for this.

Reason 2:
If you are disciplined enough, you can buy term and invest the difference and come out ahead. Funny thing is, this mantra sounds great, and has some merit, but is rarely followed up with.

For me, juvi policies come only after the breadwinner is covered.

Dan

[moonlightandmargaritas]

Reason 1:
You insure assets, not liabilities. Financially speaking, children are a liability. As cold as it sounds, families will be better off financially in the long run without kids. Please don't try to explain this to a parent, it's true, but they buy on emotion, not finances for this.

Reason 2:
If you are disciplined enough, you can buy term and invest the difference and come out ahead. Funny thing is, this mantra sounds great, and has some merit, but is rarely followed up with.

For me, juvi policies come only after the breadwinner is covered.


Finally, some semblance of logic. I applaud you Dan.

If you want to buy 'em a wedding present, go to Bed, Bath & Beyond. Of course there is no commission! If you're gonna buy financial assets, you need to do a thorough analysis to see what your dollar is buying.

Rarely followed up? You can put your life insurance policy on monthly bank draft. Don't think you can do it with a mutual fund account?

How come nobody wants to post the cash value? Is it even more brutal than I think?

[STIBROKER@AUSTIN.RR.COM]

There you go again trying to tell the client what to buy....when is the last time you listened to a client.....

Originally Posted by moonlightandmargaritas

Finally, some semblance of logic. I applaud you Dan.

If you want to buy 'em a wedding present, go to Bed, Bath & Beyond.

[djs]

Originally Posted by moonlightandmargaritas

Finally, some semblance of logic. I applaud you Dan.

If you want to buy 'em a wedding present, go to Bed, Bath & Beyond. Of course there is no commission! If you're gonna buy financial assets, you need to do a thorough analysis to see what your dollar is buying.

Rarely followed up? You can put your life insurance policy on monthly bank draft. Don't think you can do it with a mutual fund account?

How come nobody wants to post the cash value? Is it even more brutal than I think?

Are you going to post the death benefit 2 years into an investment? You are trying to compare entirely different products. Not sure why.

Dan

[atara]

My spouse and I both have policies taken out by our parents and a young age and let me tell you - we are soooooo grateful. They are so cheap!

When our baby comes, we are definately taking about WL on our child. We are actually looking into a paid-up policy so we will be done with it when the child is 18 or 20 years old.

[LGilmore]

Call it a "futures" premium... A real strong reason to purchase a wl on a kid is the GIO aspect. You have to have enough face on the base policy to allow for bigger face on the GIO.

While moonlight seems to dismiss the future insurability of people, I don't. If you pay attiention to health reports on american kids you'd think moon has his head in the sand.

Yes, there are better investments, percentages and all that good stuff..... yet none of those matter if you want to buy insurance and somebody says NO or says yes but you are table d...

Having spent decades coaching kids I have seen...

Junvenile diabetes, type II (younger and younger), cancers, cronhs (sp), drug treatment, arrests, depression etc.... and a few deaths along the way. I also see our computer generation kids getting fatter and fatter and more and more unhealthy.

Fifty bucks is cheap insurance for a guarantee nobody can say "NO" down the road for a kids lifetime. No blood, no urine, no tests, no questions.... just sign here and press hard up to nine times.

Even if you break even and have a zero net return on the life policy... what is it worth to have that guarantee?


As far as comparision I guess you could say you are buying an option... people pay for "options" on investments, why not a life policy? no difference, just buying a guarantee.

Which choice is going to cost me more if I am wrong?

So I lose a little money return wise if I choose to buy a life policy with a big GIO. Don't I lose a little money everyday I don't bring a sack lunch to the office or choose ham and cheese over PB&J... I lose money when I buy beef over beans...

My kid developes a health condition that doesn't kill him, but now is uninsurable and all we have is a little burial term policy....

Which FU really costs more moon? I can always make money...I can't turn the insurance industries "NO" into a "yes" as easily... can I?

[jerrykramer64fan]

Is there any maximum that you are allowed to put on a child without proving that there is some kind of potential loss to protect? I thought I remembered something at a CE class years ago about it. The guy called it the Jean Benne Ramsey law. They don't want people to put large amounts of life insurance on kids so they don't have accidents. Sounds sick but, we have all heard of the sick things some parents do.