Why Term over Final Expense?

[VolAgent]

Apparently this is even more counter-intuitive than I had previously recognized.

Term effectively converts the second social security payment from an annuity on one life only, with no refund or period certain, into an annuity with a period certain or partial refund.

This guarantee of a minimum amount of income over the period of the term allows the couple to spend down their assets faster than would otherwise be safe, thus allowing a higher spending level even after paying the term premiums.

UL is too expensive to make this work.

I get what you are doing, although I admit I hadn't thought of it in annuity terms. But since you brought it up, how many annuities are annuitized for any variation of period certain that were not part of a lottery distribution or structured settlement? People generally don't want income for only so many years, they tend to want it either all now or over a lifetime.

 

[steve heller]

I get what you are doing, although I admit I hadn't thought of it in annuity terms. But since you brought it up, how many annuities are annuitized for any variation of period certain that were not part of a lottery distribution or structured settlement? People generally don't want income for only so many years, they tend to want it either all now or over a lifetime.

Agreed, but a lifetime guarantee often isn't a feasible alternative in this situation, because the cost of converting that second SS payment into a joint life annuity using UL is usually prohibitive.

However, my program also allows the use of deferred fixed annuities, which can do much the same thing. That is, you can say "What if the client buys 20-year term, then buys a deferred life annuity that starts in 20 years?" That can be more cost effective than buying a life annuity right now, or using UL.

 

[walthamny]

If your business plan is based no one suing and winning, then good luck. Agents like you get sued all the time. TransAmerica is just getting sued over UL illustrations they sold 20 years ago. Sure, their agents used the correct software and illustration, and all clients signed the illustrations but that is not a viable defense. At least, it does not stop anyone from suing TransAmerica.

There are quite of few cases where agents were sued by beneficiaries and several of them have gone to State Supreme Courts and most of them have found the insurance agent liable. All the civil suits got settled that I have been a part of. So I don't know what are the chances of winning. There is a lot pressure/incentive from the insurance companies to settle these. Companies like NYL, Northwestern, Guardian don't allow you to always sell the same product to the same age group. They have been sued before and tried to make the same legal argument you are trying.

 

[steve heller]

Agreed, but that isn't a feasible alternative in this situation, because the cost of converting that second SS payment into a joint life annuity using UL is usually prohibitive.

However, my program also allows the use of deferred fixed annuities, which can do much the same thing. That is, you can say "What if the client buys 20-year term, then buys a deferred life annuity that starts in 20 years?" That can be more cost effective than buying a life annuity right now, or using UL.

If your business plan is based no one suing and winning, then good luck. Agents like you get sued all the time. TransAmerica is just getting sued over UL illustrations they sold 20 years ago. Sure, their agents used the correct software and illustration, and all clients signed the illustrations but that is not a viable defense. At least, it does not stop anyone from suing TransAmerica.

There are quite of few cases where agents were sued by beneficiaries and several of them have gone to State Supreme Courts and most of them have found the insurance agent liable. All the civil suits got settled that I have been a part of. So I don't know what are the chances of winning. There is a lot pressure/incentive from the insurance companies to settle these. Companies like NYL, Northwestern, Guardian don't allow you to always sell the same product to the same age group. They have been sued before and tried to make the same legal argument you are trying.

Anyone can sue anyone else over anything.
Thus, according to your approach, no one should ever sell anything.
Thanks for your help!

 

[BeeSelective]

If the term expires before they do, then they have received both Social Security payments for the entirety of the term.

So they are in better financial condition than if they hadn't had the insurance and one of them had died during the term.

That's what term insurance is for, after all.

If they die at 81, what good was the term insurance?

 

[Tahoe Ray]

Pension max concept but w/ social security. Present value of the income stream. At 81 it is worth substantially less than at age 60.

I've never seen it done w/ just term though...normally laddered term and a GUL/WL at the end.

I'd be interested to see what the software looks like.

 

[WinoBlues]

Apparently this is even more counter-intuitive than I had previously recognized.

Term effectively converts the second social security payment from an annuity on one life only, with no refund or period certain, into an annuity with a period certain or partial refund.

This guarantee of a minimum amount of income over the period of the term allows the couple to spend down their assets faster than would otherwise be safe, thus allowing a higher spending level even after paying the term premiums.

UL is too expensive to make this work.

Too expensive for who? The premium is not the problem, the premium is the solution.

Pension max concept but w/ social security. Present value of the income stream. At 81 it is worth substantially less than at age 60.

I've never seen it done w/ just term though...normally laddered term and a GUL/WL at the end.

I'd be interested to see what the software looks like.

Hey Ray,

You are one of the guys I was thinking about in an earlier post.

 

[steve heller]

If they die at 81, what good was the term insurance?

It allowed them to spend more of their assets because they didn't need as much to hedge against early death.

 

[Tahoe Ray]

Too expensive for who? The premium is not the problem, the premium is the solution.


Hey Ray,

You are one of the guys I was thinking about in an earlier post.

Thanks, Lee. I'd be interested in your thoughts as well once you have a chance to take a look.