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 Posted: Mon Nov 02, 2009 5:06 am Post subject: Insurance purchase! |
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| What should I consider before purchasing insurance! |
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HullyJacob
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| Posted: Mon Nov 02, 2009 6:58 am Post subject: |
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You should first of all think about your coverage needs. It would help you while shopping for a policy. Once you've identified your coverage needs (or the risks that you have), you should now think of the cost that you'd be able to bear.
Thus, you may pick the policy that offers all/most of your required benefits at a price that suits your pocket. Roddick |
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roddick
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| Posted: Wed Nov 04, 2009 3:30 am Post subject: |
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Your human life value and the rating system that determines the financial strength of an insurance company. The. Think about what's most important with regards to what you want to have happen if you are no longer around to make it happen.
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anonymous34
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| Posted: Sat Nov 07, 2009 12:48 am Post subject: |
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| Quote: | | Your human life value and the rating system that determines the financial strength of an insurance company. |
I haven't heard anyone use the term "human life value" in about 100 years. It's so "1920" that your use of the term seems somewhat antiquated.
Please don't tell me that your company is having you use the Human Life Value approach as a method of determining how much life insurance a person needs...please tell me it ain't so! 
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InsTeacher
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| Posted: Sat Nov 07, 2009 4:24 am Post subject: |
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Nope we're using the capital needs anaylsis with dec pages that require the client to sign off on the fact that we are making recommendations for as little coverage as we can possible recommend.
I've never had a conversation with a widow or widower who mentioned that she/he really didn't need all that death benefit.
In truth, I very rarely write policies based on human life value, but I'm not about to ignore it. The client has a right to know and I have a responsibility to exlain to them the full amount of insurance they would be eligible to have. Call me crazy, or "antiquated" as you put it. |
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BNTRS
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| Posted: Sat Nov 07, 2009 8:52 pm Post subject: |
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Why would you ever recommend as little as possible?
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aslfjaorou
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| Posted: Sat Nov 07, 2009 9:00 pm Post subject: |
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| Quote: | | Why would you ever recommend as little as possible? |
I too am curious about that one
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Lori
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| Posted: Sun Nov 08, 2009 2:42 am Post subject: |
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| This is why I too am confused by the capital needs analysis. |
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BNTRS
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| Posted: Wed Nov 11, 2009 2:08 am Post subject: |
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I take it we are talking about Life insurance particularly?
While there are some things you need to consider irrespective of insurance type, health and life really have their own set of key criteria
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heidrek
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| Posted: Fri Nov 13, 2009 5:28 am Post subject: |
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Needs analysis is really the only way to go. The problem with this approach is that most agents don't know how to properly apply the principle. It's not that they don't have an idea of what they're talking about, it's that in order to do an analysis properly, you need more than just a meeting with a client.
Proper needs analysis should usually be done by someone with a financial planning background and preferably a CFP or ChFC designation. Frankly, when I see poorly trained producers attempt an analysis, I usually get worried. I have had to "fix" so many pathetic tries that I just shake my head. I worked my butt off to get the designations I have and feel the after-effect when producers go where they shouldn't.
Now for the average "Johnny Paycheck" making $50k a year, often there isn't much planning out there that's apparent to the typical agent. He sees a house, a few kids and some credit card stuff and doesn't even consider estate issues. Granted, that type of client rarely has estate issues due to the small estate amount, but there are almost always lawyers and probate involved unless proper planning is involved. Oh yeah--- proper planning.
How many agents are aware of even the simplest estate tools? How many agents know what the proper use of trusts can do for even the most common client? It's the little things that differentiate those in this profession. The everyday agent doesn't take the time or effort necessary to really learn their profession.
There's quite a few people in this forum that really know what they're talking about and don't proffer information unless they know what they're writing. We appreciate that. Back to the discussion.
Human Value Approach? Tell me how you're actually making that work. In this day and age, how can it possibly be truly effective? Back in the day when Dr. Huebner invented the approach- it was the right idea. Keep in mind he was the first and there weren't any other ideas. The simple notion of taking a person's annual earnings, years until retirement and adding in a capitalization rate to account for the best guess at inflation, you arrived at a supposed face amount that takes care of every need at the death of the insured.
Great in 1895, not so much now. Too many variables. Things have changed too much. Now I welcome any comments to either disprove my statements or to show me how this antiquated theory actually works today.
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InsTeacher
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| Posted: Fri Nov 13, 2009 11:55 am Post subject: |
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| Quote: | | that require the client to sign off on the fact that we are making recommendations for as little coverage as we can possible recommend. |
I still didn't get the answer to why? why, would you recommend as little as possible? oh wait, or are you saying if the client does not bite on the 'human life value' you're having them sign off that they were offered this but declined it for the lowest possible? If that's the case I get it..
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Lori
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| Posted: Fri Nov 13, 2009 5:12 pm Post subject: |
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Insurance teacher, it's not that I disagree with you on this one, but in most cases for most people, there really isn't too much to it. It's not rocket science and it's all based upon assumptions that we know are going to be wrong.
With term insurance so cheap, why not just use whatever method you want and then add on a few hundred thousand for safety?
If Johnny Paycheck's unknowledgeable advisor believes in a 10x income approach and has him buy $500,000 of coverage, he could simply for a few extra bucks up this to $750,000. It would be nice if planning took place, but even without advanced planning, with this amount Mr. Paycheck's family has enough that they should be able to maintain the standard of living.
The low cost means that when in doubt, buy more.
I'm not disagreeing with anything that you wrote. It's a shame that you are accurate.
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fjsofaurd
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| Posted: Fri Nov 13, 2009 8:51 pm Post subject: |
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| Quote: | | With term insurance so cheap, why not just use whatever method you want and then add on a few hundred thousand for safety? |
First of all, term insurance is getting more expensive again, but that's not the issue. My concern is that term insurance is a great temporary solution to a temporary problem. Term insurance CANNOT solve a life insurance problem for the person's entire lifetime. Why not? Good question.
1. Term insurance gets more expensive every time the policy renews, if the policy allows renewal. It gets to a point where it's ridiculously expensive.
2. Most term carriers will not sell nor renew level term insurance once the insured gets to around age 60-65. Now, there are carriers that go past this age, but whew...look at the premiums for term insurance on an 80 year old man!
Then there's the "buy term and invest the difference" theory espoused by a few companies out there. This is (most of the time) the stupidest thing that I have ever heard. Can it work? Yes. Does it? Not very often.
Now onto the Value Approach. This only works in the most simple life cases where there aren't any high-end and appreciable assets nor estate planning requisites. A simple amount of coverage can absolutely work here. My problem with this, as previously posted, is the ignorance and poor training of the agent force out there. Give me a properly trained producer force and I'll give up my argument. Not gonna happen.
What about those insured's who aren't in the workforce? How would you estimate the human value of, say, a homemaker? Oh, it can be done...but how would YOU do it? What about those people who derive their income passively? What about those insureds who don't actually have to work for a living and have plenty of money, say through an inheritance? How do you figure out the amount of life insurance necessary for that demographic?
Not trying to sound demeaning, but in my experience those agents who use a simple multiple of earnings as the amount of necessary insurance coverage are working with low to lower-middle class clientele. Middle-class and higher income ranges take this concept off the table.
Comments?
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InsTeacher
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| Posted: Fri Nov 13, 2009 11:46 pm Post subject: |
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I don't know why, but the forum won't let me post while logged in to this thread.
Anyway
@Ins Teacher
I think we have similar goals, but the human life value of yesteryear is not quite my application.
I would take someone and multiple earnings by as much as 30 times in some circumstances. Not as a way to sit down and quickly tell someone you make X so we'll take X times 30 and that equals Y and that's how much you should buy.
I want the human life value number there to show how big they may actually need. I'll let them beat the number down with the "Well I only need it for this that and this..."
You are correct in stating that there are other factors, estate planning, charitable possibilities, etc. I too believe it's a bad idea to simply multiply an income but a certain number and say "here you go" and never get any deeper than that.
Capital needs analysis as I understand it is a process often used to knock down death benefit amount. E.g. "Well you think you want income covered for 5 years, the house should be paid off, and you want some money to send the kids to school so that equals..."
Big mistake in my opinion. It's a conversation starter, and sometimes substantiating evidence, not the answer.
On a side note, I have a friend who got tangled up with a CFP who he ended up with by virtue of being an orphan at a certain insurance company. He called her b/c he wanted to drop his coverage amount of his VUL from 800k to some number below that. The agent went along with it, by replacing his policy with one of those niffty high commission EIUL's. *Waves finger* |
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BNTRS
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| Posted: Sat Nov 14, 2009 4:16 am Post subject: |
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I find out what my client wants to accomplish and figure out the lump sum needed to make that happen.
For most people, like it or not, the bulk of their insurance need has to be covered by term insurance. That being said, a large portion of these people should also have permanent coverage.
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