Forethought Replacement

[thomasm]

I reviewed my first Forethought certificate today. She's paying $126 per month for a $9800 policy that she took out 5 years ago when she turned 65. No health problems.

Can anyone explain to me how these Forethought plans work? To me, it looks like just a life insurance contract where the funeral home is both the agent of record and the beneficiary. They must be making a commission for writing it and then collecting the death benefit when the funeral is serviced. Am I right?

All I know is I can save her money, and she's on a tight budget. Replacement sounds like a no brainier to me, No?

I'm meeting with her again tomorrow. This will potentially be my first replacement.

What are some of the other things besides the cost she should consider before replacing this type of plan?

 

[TDFnCali]

Sounds like a funeral or preneed plan... It's very high compared to a FE plan. But the advantages of it is, its only for a certain amount of years, like 5 or 7yrs. Sure u could cut her payment down to less then 1/2 or give her a much larger policy then she has, but your payment is for life. So explain the differences to her, but unless she's struggling to make that payment or she would rather have a much larger benefit, u might have to leave it alone... But give her the pros & cons about both & let her decide.

TDF
Sent via my Verizon Samsung G4

 

[smokin goose]

This brings up a good question. Let's say someone pays on a 5 year preneed for 2.5 years. Would half of it be paid up? I just have no idea how preneed works.

 

[thomasm]

Sounds like a funeral or preneed plan... It's very high compared to a FE plan. But the advantages of it is, its only for a certain amount of years, like 5 or 7yrs. Sure u could cut her payment down to less then 1/2 or give her a much larger policy then she has, but your payment is for life. So explain the differences to her, but unless she's struggling to make that payment or she would rather have a much larger benefit, u might have to leave it alone... But give her the pros & cons about both & let her decide.

TDF
Sent via my Verizon Samsung G4

Good Point! It might be a installment plan, but it sure looked like an insurance contract. It even had a cash value schedule. Hopefully Newby will respond to this post before my appointment tomorrow. He seems to know a lot about how these plans work! Either way I'll call Forethought and the funeral home and find out what she really has, before I take an app!

 

[TDFnCali]

This brings up a good question. Let's say someone pays on a 5 year preneed for 2.5 years. Would half of it be paid up? I just have no idea how preneed works.

Yes, after 2yrs or thereabouts.... The preneed plan is paid up if she passes. I'm not 100% sure, but about 95% after listening to Newby on the forum for the past 2+yrs.

TDF
Sent via my Verizon Samsung G4

 

[John Galt]

Yes, after 2yrs or thereabouts.... The preneed plan is paid up if she passes. I'm not 100% sure, but about 95% after listening to Newby on the forum for the past 2+yrs.

TDF
Sent via my Verizon Samsung G4

Maybe newby will chime in, this is his area of expertise, I would like to learn more on this as well.

 

[Newby]

Forethought PreNeed plans are whole life insurance that acts as the funding vehicle for a guaranteed contract with the funeral home. They are fully paid up in 3,5 or 10 years. The death benefit increases each year so even though the one you looked at was $9,600 when it started it's worth more than tha

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Forethought PreNeed plans are whole life insurance that acts as the funding vehicle for a guaranteed contract with the funeral home. They are fully paid up in 3,5 or 10 years. The death benefit increases each year so even though the one you looked at was $9,600 when it started it's worth more than tha

More than that today and will continue to grow her in tire life. The value of the plan is the higher of the increased face amount of the policy or the current price of that same funeral at the funeral home whivhever is higher.

It's unlikely after 5-years of paying that she should replace it but possible. She should never have started that plan on a 10-year schedule. Before replacing it she should check her conversion options to a paid up policy and consider that if it's a big savings over paying out the full 10-years.

In order to do a fair comparison you need to determine how much her funeral will cost at the end of her life. Assume that she will live to age 95 and assume the cost doubles every 15-years. That is the amount you need to quote her and to be fair it would need to be paid up in 5-more years.

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I reviewed my first Forethought certificate today. She's paying $126 per month for a $9800 policy that she took out 5 years ago when she turned 65. No health problems. Can anyone explain to me how these Forethought plans work? To me, it looks like just a life insurance contract where the funeral home is both the agent of record and the beneficiary. They must be making a commission for writing it and then collecting the death benefit when the funeral is serviced. Am I right? All I know is I can save her money, and she's on a tight budget. Replacement sounds like a no brainier to me, No? I'm meeting with her again tomorrow. This will potentially be my first replacement. What are some of the other things besides the cost she should consider before replacing this type of plan?

A few more things.

ForeThought doesn't sell certificates. They sell policies. A policy is better than a certificate.

The funeral home is not the beneficiary. They are the funeral provider. There will be a family member named as beneficiary. The beneficiary will recieve any money left over after the funeral is paid.

These policies always pay within 24-hours and do not need a death certificate as long as they have been in force 2-years or longer. Most FE policies do not have that feature and to re-create it the family will have to pay around 5% of the death benefit to a funding company when she dies.

If she was only a few months into her current policy and doesn't have the money to pay it off on a same as cash basis, I would say it's a good case to replace. But 5-years in it's unlikely that you should. It's easy to do because you can make the FE appear to be more for less. But in reality, it's unlikely to really be.

 

[argar5]

Pre Need policys are always a higher premium the FE Premiums my advise do not replace it if its 5 years old and she has been paying on it and BANG she cant any more hard to believe. Its most likely a 10 pay. If you do replace it you better have a good reason to explain to the Funeral Home when they see the Forethought replacement form. Funeral Homes 90 % of the time will want a needs form to show what your replacement reasons are. Hope you have E&O.
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[Newby]

Did I actually spell entire as in tire?

I am slipping.

 

[smokin goose]

Did I actually spell entire as in tire? I am slipping.

And you're my IMO ... Oh my.