Category: Life Insurance
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“Not My Family!” Strategies To Avoid Wealth Destruction
Wealth destruction at inheritance time is showing no signs of slowing down. More and more family members are litigating with one another including attorneys, CPAs, wealth managers, family businesses and other related parties. Why is behind this unfortunate trend?
Too often, all the planning attention is placed on the family’s financial and real estate assets. There is nothing wrong with this but when there were dysfunctional family dynamics before inheritance, it is likely there will be dysfunctional family dynamics upon death. Neglected during the planning process, this dysfunction can lead to unintended consequences for family and business relationships. Most people passing on wealth do so with an expectation that their generosity will be received in the spirit it was intended. Without a proper amount of focus on family dynamics, succession inheritance can cause further damage to family relationships.
Avoiding Wealth Destruction
AVOID WEALTH DESTRUCTION – CLICK HERE
Contact me at 561-869-4500 or email me at TB@LifeCyclePlanners.com for a complementary consultation. Or, visit us at Facebook
ted bernstein boca raton florida
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Customized Insurance Policy Lowers Premiums As Much As 40%
NEW INSTALLMENT PAYOUT OPTION REDUCES ANNUAL LIFE INSURANCE PREMIUMS AS MUCH AS 40%!
Life insurance buyers have a new and often better option to protect their beneficiaries. According to Ted Bernstein of Life Cycle Financial Planners, it is an important choice policyowners now have when it comes to providing long term security for their families. The Installment Option can be 40% less premium, annually.
Life insurance owners can choose how their proceeds are paid to their heirs with this option. Until this groundbreaking change emerged, a Lump-Sum payment of insurance proceeds was the only choice. Instead of having $1,000,000 paid in a lump-sum, policyholders can instruct the insurance company to customize the payment of the benefits to protect their heirs. For example, the insurance company can pay 10 equal payments of $100,000. Or, another family may choose to receive a lump-sum payment of $500,000 upon death, followed by 5 equal payments of $100,000 would be better.
We insure every aspect of our lives including our health, our homes, and our income. Why not protect your beneficiaries from mismanagement they can’t recover from, especially after you’re gone?
INSTALLMENT PAYOUT OR LUMP-SUM? WHICH IS BETTER?
“A Lump-Sum payout to heirs is often a recipe for disaster”, warns Ted Bernstein of Life Cycle Financial Planners. The proceeds are gone within 3-5 years because it is difficult for many to manage a sudden lump-sum of money, similar to the issues facing lottery winners who take a lump-sum. As a result, life insurance consumers now have an alternative. “Policyholders can protect their families from investment risk and drastically reduce their insurance premiums at the same time”, says Mr. Bernstein.
Frequently Asked Questions:
For many, it is a better structure and choosing it can save consumers as much as 40% EVERY YEAR for the same amount of insurance. Or, they can increase the coverage by 40% for the same premium as a lump-sum option. The payments can be paid between 10 and 30 years.
Ask us about apply and buy life insurance that allows life insurance buyers to get up to $5,000,000 of coverage in one phone call! WITH NO MEDICAL EXAM. No blood or urine tests, visits from insurance company doctors or an agent! Both term and permanent life insurance policies are available – Term, Whole Life, Universal Life, Guaranteed Universal Life, Indexed Universal Life.
“From my experience, parents want to make sure there is enough life insurance to avoid any economic upheaval in the event of an early parental loss”, advises Deborah Bernstein of Life Cycle Planners. “The installment option is peace of mind you just don’t have with a lump-sum payout. We have seen too many situations where all the proceeds are gone within a few years of lump-sum payments”. As the innovator of this option, Ted Bernstein says both term and permanent policies are available from the highest rated U.S. insurance companies.
Special Needs Families: For families with special needs children, there is no room for error when it comes to investing assets for a lifetime. The Installment Option provides these families with a GUARANTEED solution.
The Installment Payout Option:
- Reduces premiums as much as 40% for same amount of death benefit.
- Premiums and benefits are GUARANTEED.
- Protects heirs from risk by guaranteeing payments over time.
- Customizable – great flexibility. Payment periods between 10 and 30 years.
Please call us at 561-869-4500 and let us help you compare your existing coverage. Or, email Ted.
Make sure to inquire about Life Insurance with living benefits and turn the face amount of your life insurance policy into an emergency health insurance fund.
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Catastrophe Insurance For Critical Health Problems says Ted Bernstein Boca Raton
Living Benefits Adds Immediate Protection For Critical & Chronic Health Problems says Ted Bernstein, at no extra cost! Does Your Current Policy Allow You to Take an Advance Against the Face Amount at No Cost? Learn How You Can Get Money From Your Life Insurance Policy. Living Benefits Life Insurance by Ted Bernstein Boca Raton
Life Insurance is benefiting from innovations in medicine, prevention and intervention. These innovations lead to lower premiums. Policies from only 5 years ago are obsolete in terms of price and features. For most people, being older does not matter; rates are dropping at a faster pace than we are aging and the coverage is getting better too. Catastrophe Insurance For Critical Health Problems by Ted Bernstein Boca Raton
Call us today at 561-869-4500 to upgrade your policy to one with living benefits, either for term or permanent policies.
The following link answers the most basic questions about the value of adding living benefits to your coverage:Living Benefits Life Insurance by Ted Bernstein Boca Raton
Living Benefits: LIVING BENEFITS OVERVIEW
Our job is to guide you through the selection process to make sure you get a policy with all the living benefits (critical, chronic, terminal) and the lowest premiums. We offer policies that most other agents can not offer you. Because we have been selling living benefits coverage since 2013, we are market leaders for A+ carriers specializing in living benefits. Living Benefits Life Insurance by Ted Bernstein Boca Raton
Want to learn more? Please contact me at 561-869-4500 or by email. I will clarify and answer any questions on a complementary basis.”
Ted Bernstein Boca Raton Florida
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10 Life Insurance Underwriting Tips To Lower Your Costs
Life Insurance Underwriting – Demystifying The Black Box of Underwriting
Sex, Drugs and Genetics
One of the most effective ways of reducing your cost of life insurance is by improving the rate class or making sure to get the best class possible when buying new coverage. Once you decide to purchase a life insurance policy, the process of underwriting begins. Life insurance underwriting is the process allowing an insurance company to determine the appropriate rate class for your policy. It is important because the rate class determines the premium. There are many different rate classifications, usually starting at preferred. Most companies use a system with 16 extra classes – the highest rating being a Table 16.
A system of credits and debits.
Overweight by 20 pounds? On high blood pressure medication? Smoke an occasional cigar or occasionally use marijuana?
Most people feel certain that any one of these will cause their life insurance premiums to be higher. In most cases, not one of them will increase the rate or knock you out of standard rates.
You should expect to pay the lowest possible premiums and receive the best rate class each company offers, based on your specific information. It is the responsibility of your agent to get you the best rate by giving the underwriters all the information in the best light possible. Underwriters convert positive information into credits and negative information into debits. More information is better. Still, too many people are not paying the lowest possible premiums.
The difference between one or two rate classes can lower premiums by 20% or more, annually.
Life insurance underwriting is a blend of art, skill and experience. The key to getting the lowest rates possible is full disclosure on your part. The improvements in medical sciences are leading to lower premiums. These improvements lead to more people reaching life expectancy, resulting in decreasing premiums. In other words, the rates you are paying on policies issued several years ago are likely MORE than new policies issued today, even though you are older. If you are in similar or better health, you should be able to reduce your cost of life insurance.
The following issues require good life insurance underwriting management. A good underwriter will consider many factors to determine your rate class. The more information you and the agent provide to the carrier, the better your chances will be in creating maximum credits:
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Extra weight. Most people carrying extra weight miscalculate by a lot how their premiums will be affected. Typically, unless the extra weight puts you in the obese class or is causing other medical problems, added pounds do not automatically warrant any rate increase.
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Cardiovascular issues. Many life insurance companies excel at underwriting these cases. If there is good follow up and control, many insurance companies will consider standard rates after a few years.
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If you have had cancer in the past, you have a reasonable chance of getting a policy with standard or preferred rates, depending on the history and your current health. Do not assume the worst; this is a classic mistake made by people and their advisors, including their physicians. I have many clients with cancer history who now have standard rates.
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People with Type 1 diabetes typically have impaired life expectancy across the board, so your rates will depend on how well controlled your condition is and what you need to control it. If well controlled, Type 2 should lead to a smaller spike in rates. Diabetes is complicated and requires excellent underwriting.
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Mood Stabilizing Drugs, Depression, Psychotherapy. If you’re taking medication for an ongoing condition such as anxiety or depression (meaning it’s more than just a temporary state due to, say, a loved one’s death), you will probably see higher rates, but typically not what most people expect. The insurance industry needs to review these issues regularly as the medications are better and untreated anxiety and depression is far worse.
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Family history. If immediate family members have had serious or hereditary conditions, that may prevent you from getting preferred rates. The biggest culprits here are cardiovascular disease (especially if a parent died from it before 60), cancer and diabetes.
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Cholesterol & High Blood Pressure. Controlled high cholesterol and blood pressure, by themselves, typically do not add extra cost or deny you preferred rates. With these conditions, it is all about control and stability.
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Nicotine use. The use of nicotine comes in many delivery systems and life insurance companies are not consistent about this topic. Using the Installment Payout Option can help smokers reduce their premiums by as much as 40% per year.
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Driving History. If you have more than two moving violations in the last three years, you likely won’t be able to get the best life insurance rates. Time is your friend here, even for the most serious offenses.
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Substance abuse. It is impossible to generalize with substance abuse history. However, with full disclosure and a strong record of non usage, life insurance can be obtained at standard rates.
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Lifestyle/Career Issues. Any hazardous, regular activities such as rock climbing, motorized racing, skydiving, ultralight flying, hang gliding, and scuba diving could increase life insurance premiums.
While some companies increase rates for firefighters and police officers, many do not.
Full disclosure and working with an experienced agent is crucial. Knowing which companies excel in the each area and then not being afraid to challenge underwriters are some of the advantages you will get from an experienced professional.
Want to learn more? Please contact me at 561-869-4500 or by email. I will clarify and answer any questions on a complementary basis.”
Ted Bernstein Boca Raton Florida
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Don’t Need or Don’t Want An Existing Life Insurance Policy?
Do You Know The Market Value Of Your Existing, Inforce Life Insurance Policy?
Every day, people are receiving significant cash payments for unwanted or unneeded life insurance policies they thought had no value.
If you are 65 or older, you may have a policy with asset value in the secondary market. The value of policies is measured as a percentage of the face amount. If you have a $2,000,000 policy with a settlement value of 10%, it is worth $200,000. It is fairly simple and straightforward to get an appraisal done to determine your policy’s value.
Please email or call me at 561-869-4500. Visit us at Life Cycle Planners in Boca Raton, Florida.
The secondary market is the market for unwanted life insurance policies – they are usually institutional investors. A good analogy is Carmax. They buy cars from people who don’t want or need them anymore. They specialize in the aftermarket of automobiles. In the life insurance industry, there are buyers who specialize in this market and they are typically the highest bidders.
The state of Florida has made it mandatory for life insurance companies to inform Floridians that they should consult with a professional when contemplating a change:
…“a life insurer shall provide an individual life insurance policyholder with a statement informing him or her that if he or she is considering making changes in the status of his or her policy, he or she should consult with a licensed insurance or financial advisor.”
If you have a policy with cash value, its value is based on it and nothing more. Life settlements may not appeal to everyone. Some people don’t like the idea of strangers having an interest in their mortality. It is a perfectly reasonable position, regardless of the potential financial benefit that might exist. There can be meaningful differences in the offers you receive from the secondary market.
Term life insurance policies may have value in the secondary market.
There may be no cash surrender value in your life insurance policy but there may be great “market value” for a life settlement company. The payment you receive in a life settlement transaction is the market value (see the recent case studies below).
It may be in your best interest to consider selling. The goal is to compare offers you receive against the value in the policy.
More than 90% of seniors lapse policies without knowing about this option. They would have considered a life settlement if they were aware of the process.Further, 79 percent feel their advisers should have told them first.
Depending on several factors, including age, health and policy type, life insurance policies can be valued as much as 20-30% of the face value. If you no longer want to pay premiums for a policy, there are realistic options to consider.
The reasons to consider selling an unwanted or unneeded policy:
· Receive a higher cash payout than cash surrender value.
· Receive money for a term policy.
· Create cash to fund retirement solutions such as guaranteed income annuities, long term care insurance or life insurance with the installment payout option.For example, 30 years ago, Dr. Smith purchased $2,000,000 of life insurance to protect his wife and children against the loss of his $300,000 income. He was 46 when it was issued and today, at 75, his children are grown and the need for income protection is gone. With nearly $200,000 of guaranteed lifetime income from annuities, a pension and social security, Dr. Smith feels the policy is unnecessary.
The insurance policy had a cash value value of $90,000 if he walked away. The Life Settlement value was 15% of the face value, or $300,000. The decision was simple in this case.
Unfortunately, each year there are too many people who are still unaware of life settlements or they fail to give it proper consideration.
Potential Disadvantages:
- Life Insurance benefits are usually income tax-free. Some portion of a life settlement may be subject to income tax.
- Paperwork is required to transfer the ownership of the policy.
- Proceeds will benefit the buyers, typically non-family members.
Organizations such as the AICPA and hundreds of esteemed estate planning law firms are on record advocating the benefits of life settlements. Life insurance is an asset with great potential value.
RECENT CASE STUDIES REPORTED IN THE INDUSTRY
– an 88 year old male sold a $2,500,000 John Hancock policy, which netted him $500,000 (cash surrender value was $0),
– an 88 year old male sold a $2,000,000 universal life policy for $1,110,000 (cash surrender value was $218,000),
– a 64 year old female sold a term policy for $20,100 (the face value was $250,000; she kept $50,000 for her beneficiary),
– a 72 year old man sold a $896,450 Transamerica policy for $196,476 (cash surrender value was $94,647),
– a 61 year old man sold a $400,000 Mass Mutual term policy for $220,400.
Please email me at Ted Bernstein or call me at 561-869-4500. Visit us at Life Cycle Planners in Boca Raton, Florida.
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Life Insurance Premium Financing – Minimizing The Risks.
Why do high net worth people borrow to purchase life insurance?
Premium financing relies on the concept of interest rate arbitrage. A loan enables life insurance owners to keep their money working for them and earning a higher rate of return than the interest rate charged for the loan. Instead of paying life insurance premiums with their own capital, a low cost loan is advantageous. This rate arbitrage must be favorable and appreciated for a successful premium financing arrangement to be suitable and make sense for the borrower.
The Advantages of Premium Financing are:
- Low cost method to fund permanent life insurance while offering great flexibility in the future.
- Using well managed leverage to drive down out of pocket costs.
- Using life insurance to offset estate taxes.
- Using low cost loans to fund permanent life insurance with the goal being of having fully funded policies in the later years.
- To minimize out of pocket costs in early years until the anticipated exit strategies can pay off the loan.
Successful premium financing is understanding the risks and managing expectations. Working together with insurance companies and lenders ensures successful outcomes. People borrow money to pay for life insurance because they can borrow the annual premiums at a lower rate than what they are earning on their money. This historically reliable arbitrage between loan interest rates and a borrower’s ROI must be present for this to make sense. Later, we will explore this important arbitrage in more detail.
Premium Financing gives families with illiquid estates the ability to acquire large amounts of needed liquidity at death. By only paying annual interest on the loan, the out of pocket cost is less than paying properly funded permanent policies. Many estate planning attorneys find this financing strategy helpful to accomplish their wealth transfer objectives.
With short term interest rates near zero percent, life insurance premium financing gets strong consideration among high net worth life insurance buyers. Proceeds from life insurance provides the much needed liquidity that complements succession planning and wealth transfer planning strategies. Financing jumbo life insurance policies is often appealing to HNW people and their advisors because the arbitrage DOES EXIST between actual borrowing cost and the client’s overall ROI. If we look back 50 years, we see that interest rates are lower than insurance company crediting rates, with almost no exceptions. This correlation is the foundation of successful premium financing.
I have arranged financing for more than 500 families over the course of my career. As a result, I bring valuable expertise and experience that benefits consumers, their advisors, lenders and life insurance companies. For example, it is true that low interest rates are beneficial, if nothing more than causing a lower out of pocket cost. But, financing a life insurance policy should make sense whether interest rates are 3%, 6% or 9%. When borrowing costs increase, the values inside the life insurance policy should also be increasing. That can also lead to less collateral being needed for the loan and less premiums to fund the policy.
The borrowing rate is only one part of the premium finance story. Historically, insurance companies pay higher interest on policy cash values than borrowers pay for interest on loans. This is the other important rate arbitrage that should exist in properly structured premium finance arrangements.
Premium Financing Done Right.
Not free life insurance.
If premium financing is not “free life insurance”, then what is the true cost of financing a life insurance policy? It is the annual interest expense; that is the true out of pocket “cost” of a premium finance loan. When the loan is paid off, either during lifetime or upon death, that too is part of the cost.
With rates near 0%, premium financing is a strategy that deserves strong consideration for high net worth individuals, families and business owners who need permanent life insurance coverage. Compared to paying the annual premiums out of pocket, there are advantages to using a competitively priced loan to pay the premiums.
A properly structured premium finance arrangement is best suited for people who need and want coverage for life. The cost to borrow the annual premiums should be at least 3% lower than the ROI on their other assets. This creates another arbitrage that justifies premium financing. For example, if the loan interest rate is 4%, then the borrower’s ROI on other assets should be 7% or greater. If it is not, then it may not make sense to finance life insurance.
Premium Financing Considerations:
Each premium finance loan is unique and should be stress tested using conservative assumptions. We recommend working with experienced insurance professionals, advisors and experienced lenders who are familiar with this asset class.
The majority of the collateral for premium finance loans is typically the cash value within the policy. The reason lenders are willing to make premium finance loans at low interest rates is because cash value is considered to be as creditworthy as cash. Currently, premium finance loans are less than 3%. While interest rates are at historic lows, it can be wise to consider locking in a fixed rate.
Exit Strategy and The Loan Payoff.
There must be a sensible exit strategy to pay off the loan. One option is to use cash value from the policy. Another is to use assets already in the trust, such as inheritance monies, liquidity events from sales, etc. When the cash value of the policy is used to pay off the debt, make sure the policy is properly funded to remain inforce for life, after the cash value has been withdrawn or borrowed from the policy.
Can Real estate be used as collateral for premium finance loans?
Lenders typically do not like lending against real estate for these loans because the collateral is not easily available. However, there are some lenders that do work with existing clients to use real estate to support these loans. This tends to complicate something that is already complex. Customers with strong relationships have been known to receive loans from their existing bank.
Premium Financing and Estate Planning.
A premium financing arrangement can be beneficial to your overall estate plan. The life insurance policy is typically owned in a trust without gift tax or estate tax consequence. It is not uncommon for $25,000,000+ life insurance policies to be financed and owned in trusts that may be exempt from gift or estate taxation.
Premium Financing Is Best Suited For:
- Clients who need jumbo amounts of permanent death benefit.
2. Clients who understand leverage & complex financial transactions, or
3. Clients using life insurance to offset estate taxes.
Business owners interested in succession planning and key-person protection may also be good candidates for premium finance arrangements:
Top 7 Premium Finance Considerations:
- Lenders and insurance companies require that these loans are collateralized. The policy’s cash value is typically the majority of the collateral. In the early years, there is typically a small gap which the policy owner is required to satisfy.
- The borrowing cost and the policy crediting rates have long been favorably correlated for these types of structures. They historically move in the same direction with the insurance policy crediting rates and dividend scales being higher than the borrowing costs.
- Assuming you feel this strong correlation will continue in the future, financing may be right for you.
- A positive rate arbitrage is created when policy crediting rates are greater than loan costs and a cushion is created that can be used when interest rates turn volatile or increase rapidly.
- When interest rates rise quickly, there may be temporary rate compression or even rate inversion. Either scenario could increase the annual interest expense until rates stabilize.
- The cash value of the life insurance policy ultimately represents 100% of the required collateral for the loan. Gap collateral must be pledged until the cash value is 100% of loan value, typically in less than 10 years.
- Properly structured, no personal guarantees are necessary.
Premium Finance Risks:
– Decreasing policy interest rates and policy performance risk.
– Increasing borrowing costs or inability to refinance.
– Policy lapse risk.
– Collateral call risk.
– Income tax risk.
STOLI RISK: Many premium finance structures have been created or used to take advantage of consumers and insurance companies by purchasing policies owned by strangers. They do this for the sole purpose of re-selling or using them for an illegal profit. We will not participate in STOLI arrangements and we urge people to avoid using life insurance for anything other than long term death benefit. Stranger Owned Life Insurance (STOLI) is not legitimate premium financing and should be avoided. Before proceeding with any premium financing arrangement, you want to fully understand the risks mentioned here and the exit strategies.
Inforce Life Insurance Policy Premium Financing:
- Policy is the only collateral for the full loan balance; no PG.
- Our capital source is a New York lender experienced in this asset class.
- 7-year loan maximum.
- Fees and interest are financed as part of the loan. Little or no out of pocket expense.
- Competitive interest rate.
- Life expectancies: 12 years or Less. Sweet spot is 9 years or less.
- Insureds: 70 and over.
- Individual Policies: $3-99m face.
- Portfolios: $35-500m face.
- Issued Preferred or Standard.
- Term sheets: Please allow turnaround time of 3-4 working days.
- International loans not an issue.
In addition to securing coverage and arranging for the right lenders for each loan, Ted is often hired as an impartial consultant to help life insurance buyers determine which is the best financing solution. These cases often involve jumbo insurance amounts. Working with an experienced consultant on your side that is not selling product can prove to be very valuable.
You can Email Ted or contact him directly at 561-869-4500.
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Lower Your Life Insurance Premiums With A Smart Hybrid Policy – Protect Your Beneficiaries Better.
Lower the Cost of Your Life Insurance and Protect Your Heirs the Way You Intended:
Until now, life insurance buyers did not have an option to structure the payment of the policy’s proceeds to their beneficiaries. All that has changed – now you have the control to design the payout exactly as you want them paid. Why does this matter?
Turning the proceeds into guaranteed payments by the insurance company LOWERS THE ANNUAL PREMIUMS as much as 40% and protects the proceeds from every kind of risk.
Do you want the beneficiaries of your life insurance policy to receive a lump sum? One of the most important things you can do for your heirs is to protect them exactly as you intended when you decided to purchase life insurance. Remarkably, life insurance proceeds only last, on average, 3 years! Ask any parent or spouse if they INTEND the proceeds to be gone in 3 years. That is never their intention.
The perfect plan guarantees the number of payments you choose, turning the proceeds into payments that can never be mismanaged. With interest, the insurance company makes structured payments to your beneficiaries based on the plan you create when you set up the policy. Everything is guaranteed. You can change the plan anytime.
For example, instead of a $2,000,000 lump-sum payment, your beneficiaries can receive equal payments of $200,000 for 10 years. Or equal payments of $100,000 for 20 years. How about a plan that pays $500,000 upon death and 10 more equal payments of $150,000? Each person is different and now, each person can customize the payout to meet their precise, individual needs.
It gets better. The premiums can be as much as 40% lower every year depending on the time frame you choose. Or, for the same premium in your current policy, you can increase the amount of insurance up to 40%!
The “Installment Payout Option” allows the policy owner, at the point of purchase, to choose how many years to defer these payments.
Win –Win: You either purchase up to 40% more life insurance for the same premium as a lump-sum payout or lower your annual premiums up to 40% every year. By choosing a greater number of payout years, the ANNUAL SAVINGS is increased.
The surge in annuity sales over the past several years is evidence that principal protection and guaranteed results are critically important to millions of consumers. “This groundbreaking alternative is the perfect life insurance solution”, says Ted Bernstein of Life Cycle Financial Planners. And, it is available for both term and permanent coverage.
Why upgrade to the Installment Payout Plan?
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Transform lump-sum proceeds into guaranteed installments.
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Offers the most competitive premiums available – everything GUARANTEED.
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Reduces premiums as much as 40% for same amount of death benefit.
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Protects life insurance proceeds from market risk.
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Tremendous flexibility, installment periods between 5 and 30 years.
“The biggest challenge we face is raising awareness of this important option”, says Ted Bernstein, Owner of Life Cycle Financial Planners. “Almost everyone can upgrade their insurance coverage and we are uniquely qualified to help our clients…even smokers and people paying more for rated policies.”
Please call us at 561-869-4500 and let us help you compare your existing policy with the benefits of the Installment Payout Option. Or, email Ted.Make sure to inquire about Life Insurance with living benefits and turn the face amount of your life insurance policy into an emergency health insurance fund.
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Life Insurance Industry Must Do Better Controlling The Important Conversations.
Can you recall any life insurance company campaigns targeting consumers directly about the value and virtues of their core products? Have you ever seen these ads during the LPGA, The Masters, The World Cup or the World Series?
They could be promoting the value of income annuities in retirement, or the differences between permanent life insurance and term insurance? Each of those events reaches the necessary demographics for our industry. Imagine if Apple did not advertise directly to their customers? What if Ford didn’t advertise directly to buyers but GM and Toyota did, spending hundreds of millions of dollars targeted right at those consumers? The immediate impact on GM sales would be dramatic.
Imagine if these companies left the sole messaging responsibility to their local, privately owned distributors? They wouldn’t. It would be disastrous in every way. And yet, this is exactly what is happening with the life and annuity companies; almost without exception.
This is not about brand advertising. There is plenty of money being spent on branding ad campaigns while Suze Orman, Ken Fisher and Dave Ramsey have taken control of these conversations affecting our businesses.
Why are these companies not advertising and marketing their products to their policyholders? One explanation from some companies is that they do not sell directly to consumers and as a result, it is not their responsibility. Insurance companies rely on a variety of distribution methods to sell and reach their policyholders, mostly through a network of professional agents who specialize in the sale of these products.
Distribution in the automobile industry is similar. For example, as consumers, we are unable to purchase a BMW directly from the BMW company. Nor can we buy a Cadillac directly from GM. We buy from their middleman, their dealerships. The car companies support their distributors in many ways and one way is through direct to consumer advertising and marketing. The manufacturers advertise on a national level and their dealerships are targeting more locally in a coordinated partnership.
We have reached the point where our product manufacturers must seize this responsibility and begin to advertise, promote and market the products they manufacture, directly to insurance and annuity buyers. Over the past several years, there has been an obsession to “crack the code”, to find a way to jump start and create online consumer demand for life insurance and annuities. Unfortunately for all stakeholders, no magic bullet has been found. Life insurance is sold, not bought. But the insurance companies can help us create demand for these products. We are the industry’s “dealerships” and we simply cannot afford to shoulder this responsibility without their help.
The time is now for the industry to use its formidable resources and take control of these conversations. The carriers should begin inspirational campaigns that are dedicated to influence consumers to take action. This messaging requires complex, multi-media campaigns. I believe the ROI will be significant on many tangible and intangible levels, especially on new sales.
Without this change, calculated misinformation from our competitors will continue to influence consumers about our products. Consumers will lack the education based information to make informed decisions which negatively impacts sales. As the whole pie continues shrinking, so too will the overall slice for each distributor. We know this happens. The industry continues to lose agents every year and the remaining agents have reached an average age of 60. Sales are down or flat every year!
Currently, it is our competitors who define our products, our services and our professional status. They spend more, they message better and they communicate better with financial journalists. With all due respect to the few journalists who cover and do know the insurance and annuity space well, there are far too many others making incorrect and un-rebutted claims about our industry. I worry every time I see an article about life insurance and annuities written by journalists without the credentials to critique these products. Asking the distribution system to be solely responsible for pushing back against these misinformation campaigns is ineffective. By definition, we are easily dismissed for lacking objectivity and impartiality.
As these trends persist, crises of uninsured’s and under-insured’s have emerged into a national problem. I also suggest that there is a crisis of incorrectly insured’s, people who own the wrong coverage. There are millions of term insurance policyholders in their 50’s and 60’s who are near the end of the guaranteed term period, without good options. They didn’t convert and the conversion deadline passed meaning they cannot convert if they wanted to. For some, obtaining new coverage is filled with hurdles. Their health has changed and their budgets may not allow them to acquire what they now need.
How did they get here? Suzy Orman, Dave Ramsey and Art Williams told them to buy term and invest the difference. But nobody did. They bought term but didn’t invest the difference with any kind of discipline, if they did at all. Too many inexperienced insurance agents told people they would not need life insurance once their kids were grown and independent. Ask any person over 50 with kids and a spouse if they have no further need for life insurance today. There is plenty of pain and blame to go around but these consumers deserve good solutions going forward and we need to counsel the millennial generation about how to buy the right blend of affordable protection, for now, and permanent coverage for later. The cheapest term insurance product when they’re 35 is not the answer.
It is time for the entire compensation system to be reconsidered. Part of the reason for the widening gap of un-insured’s and under-insured’s in the middle market is because the commission is too low for sales in this market. As premiums drop and commission levels remain constant, the selling compensation is dropping in real terms.
To conclude with some good news, I am hearing more and more carrier interest about direct to consumer campaigns. Let’s hope this interest turns into real, meaningful dialogue about these issues, with all stakeholders.
I can be reached at Life Cycle Planners, Email or Facebook.
