If you want to sell more life insurance, then you must stop selling Life Insurance, and start helping your prospects to see the benefits of owning Life Insurance!
I know what you are thinking… “I’ve heard it all before! If I want to sell more life insurance I must help my prospects to see and understand how they, their family will benefit by owning life insurance!”
My question to you is, if you’ve heard it all before… Then why aren’t you doing it?
The reason most agents, advisors and planners aren’t selling more life insurance is they don’t truly understand the benefits of owning life insurance themselves. Yes, they may know that they need the death benefit protection for their family and spouse. But, like most of their clients they don’t see the value of owning a policy themselves. So, like their clients, they rent their life insurance protection. (Buy Term Life Insurance)
If I may ask, how long will you need your life insurance protection?
If you listen to Primerica and the rest of the “Buy Term and Invest the Difference” advocates, they would like us to believe that we will only need the protection until we have accumulated enough cash to live comfortably on. And, on the surface that seems to make sense.
However, let’s look at the reality of most peoples’ financial situation. Will most people save enough money to live comfortably on, prior to retirement?
When we say enough money to live comfortably on, what are we talking about? Aren’t we talking about being able to generate enough income each year to cover our normal living expenses, our current standard of living, income taxes, emergencies and final expenses? So, if we were to die today, and our family needs a minimum of $50,000 each year to cover their current expenses, then how much money do we need to have accumulated? At a modest 5% annual rate of return, don’t we need to have accumulated at least $1,000,000? However, that doesn’t take into account annual inflation! In just 10 years, at 4% inflation, won’t we need about $75,000 per year to maintain our same standard of living? Now, how much money do we need in our accounts? How much money will we need in 20 or 30 years from now?
Now let’s consider, what percentage of the population actually has $1,000,000 or more of assets? According to Capgemini and Merrill Lynch & Co. in 2005, “Only 1 in 125 Americans have more than $1 million in financial assets such as stocks, bonds, bank accounts, real estate and businesses they own.” That is less than 1% of the entire U.S. population, including retirees!
And, here’s the real problem… “The Commerce Department reported that in 2005, the savings rate fell into negative territory at minus 0.5 percent, meaning Americans not only spent all of their after-tax income but also had to borrow money or plunder their savings. This is the first time the savings ratio has gone negative for an entire year since 1932 and 1933, when the US was struggling to cope with the Great Depression.”
How much money have you saved so far?
What’s the chance of you, or your clients, accumulating enough money to live comfortably on, prior to retirement? Would you agree that it’s not very likely? If most of us will not have accumulated enough money to live comfortably on prior to retirement, then how long will we need life insurance? Based on the above, it appears that we will need our life insurance at least until we retire!
Will we need life insurance in our retirement years?
If less than 1% of the population will have accumulated enough money to live on, prior to retirement, then where will we get the additional income we need in retirement, to maintain our current life style? Isn’t the additional income we need going to come from our Company Pension Plans and Social Security?
What happens to the income from our Company Pension Plans and Social Security when we eventually die? There are a myriad of ‘survivor options’ in company pension plans, and they all boil down to the surviving spouse receiving less income. And, with Social Security won’t the surviving spouse lose the smaller of the two Social Security payments?
Plus, at death, isn’t there going to be additional expenses for burial, hospital, probate, etc. If we pay those expenses out of our savings, doesn’t that mean there is less money to generate an income for our surviving spouse?
How will the surviving spouse maintain their current standard of living, with this reduced income?
If the surviving spouse only loses $1,050 of income per month, from the reduction in pensions, social security and assets, that’s $12,600 per year. To replace that lost income, based on a 5% return, won’t they need $250,000 of additional cash, from a insurance policy? (Note: We are conserving the investment principal to account for effects of inflation and additional taxes over the next ten, twenty or more years of retirement.)
Let’s go back to the main question… How long will you need your life insurance protection? Isn’t the Answer? Until you die!
If most of us will need insurance for our entire lives, until we die, then is term insurance the right answer?
In theory, term insurance would appear to be the least expensive way to get the protection we need fort our family and spouse. However, that assumes that we are in excellent health until the day we die, and that we are able to qualify for the lowest premiums during our entire lives. And, that is a big assumption!
The reality is, as we grow older, most of us gain weight, develop minor health issues and we won’t qualify for the lowest term insurance premiums. And, for those of us that develop major health problems, we may not qualify for term insurance at all. Then, consider that almost every term insurance policy ends by age 85.
If at age 65, you are lucky enough to qualify for the absolute lowest rates on a minimal $250,000 twenty-year term policy, it will cost you $3,500 per year. However, if you have some minor health issues and only qualify for standard rates, the same $250,000 twenty-year term policy, will cost you over $5,000 per year. Now consider, if you are in good health at age 65, then don’t you have a very good chance of living well past age 85? And, if you live past age 85 you’ll have no life insurance. You’ve just spent $70,000 to $100,000, during those 20 years, with nothing to show for it! And, we are not even adding in the cost of the term life insurance, for the 40 years prior to retirement.
The Advantages Of Permanent Cash Value Insurance!
The primary advantage of Permanent, Cash Value, Life Insurance is that it is designed to provide your family with the protection they need, for as long as you live. (As long as you properly fund the life insurance policy.) For example; a typical, a middle of the road, $250,000 permanent, cash value life insurance policy, purchased at age 25, and properly funded will cost you about $1,700 per year. (Assuming you are just in good health.)
At age 65, that $250,000 policy will have a cash value of approximately $185,000, and you will have paid in only $68,000 during those 40 years. That’s an average annual return of 4.39% for the 40 years, and you’ve had $250,000 of life insurance protection for your family and spouse for the entire 40 years.
Now, at age 65 you can stop paying the premiums, and you will have a minimum of $250,000 of life insurance protection for the rest of your life. Remember, Permanent, Cash Value Life Insurance policy does not end at age 85, like term insurance does!
Can you and your clients afford the premiums for ‘Permanent Cash Value Insurance?’
What’s the biggest objection to purchasing cash value insurance? “I can’t afford it!” “Cash value life insurance is just too expensive!”
Where can you ‘Find the Money’ for permanent, cash value life insurance!
Are the additional premiums you are paying for low deductibles and riders on your Homeowners, Auto, Disability, Long Term Care, Health and Life Insurance policies more important that having the right amount and type of life insurance protection for your family and spouse? Can you free up $400, $500 or more per year by increasing deductibles and removing unnecessary riders? What is the higher priority?
How much money are you spending everyday, on the way to work, for coffee and donuts? Or, going out to lunch with your associates? Or, drinks after work? If you average spending just $4 per day, 5 days per week, 50 weeks per year, that is $1,000 dollars per year!
How much debt are you carrying on charge cards? How much interest are you paying each year on those charge cards? “In 2005, the credit card industry reported the average household consumer debt at about $9,000, and it’s reported to be closer to $13,000 when you exclude the households that pay their bills in full each month. The average household spends over $1,700 per year on finance charges and late fees.”
These are just a few of the many places where you and your prospects can ‘Find the Money’ to afford the premiums for permanent, cash value life insurance, without dramatically changing your current life style!
You need to ask yourself, and get your prospects to ask themselves… “What will happen to my family and spouse, if I die without enough life insurance?” “Will my family be able to keep their home, put food on the table, afford college, take vacations, and put braces on Mary’s teeth, etc., if they lose my income?”
If you want to protect your family, then you need to ‘Find the Money’ to get this invaluable permanent protection!
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