As September is Life Insurance Awareness Month, this is a great testament to the value of how life insurance protects us. We offer state of the art solutions that are customized to meet your specific goals and objectives. Let us help you minimize your premiums and maximize the value of your coverage. Please call me at 561-869-4500 or email me at tb@lifecycleplanners.com
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.
With interest rates at historic lows and people living longer, guaranteed lifetime income is critical to a secure retirement plan. I recently wrote an article about Longevity Risk in a column I write for the Boca Raton Tribune about Life Cycle Financial Planning. It is just as relevant today.
“A lack of awareness and understanding about guaranteed income solutions is keeping an alarming number of people at risk during retirement. Most people feel safer and more secure with adequate amounts of guaranteed lifetime income. Without it, you are missing a key component of a balanced retirement plan. With it, your future is anchored in security, allowing you to consider more risk in other areas. An experienced specialist in guaranteed income solutions can help you determine the appropriate amount of income for your specific retirement plan.”
Click Here to Read the full article on how you can Take Charge With Income You Cannot Outlive
Life insurance without built-in commissions is best suited for permanent life insurance buyers who want low premiums and better performance, especially in the very early years. The commissioned compensation model was designed more than 100 years ago when the average face amount of a life insurance policy was less than $5000. Today, some people purchase life insurance policies with face amounts as high as one hundred million. If you are considering a permanent life insurance policy, chances are good that you will find value in life insurance policies that offer some flexibility over how much commission is paid.
Life insurance premium financing is a perfect example for using a low commission product to enhance the structure of the financing. I believe it is a primary financing goal to borrow as little as possible and pay the least amount of interest expense for the loan. Designing the life insurance policy properly can help accomplish both of these objectives.
As the innovator of life insurance without commissions or fee-based life insurance, I will always be concerned about the negative perceptions associated with life insurance. Offering complete disclosure and transparency about policy pricing, permanent insurance without built-in commissions can offer meaningful value to life insurance buyers.
Instead of creating policies with built-in commissions, the insurance company can design policies to offer better value in the early years, especially. Because the commission is a relatively small expense over the life of a policy, its long term impact is less dramatic. When the insurance company does not have to pay high early year commissions, the policy’s early year surrender values can be as much as 95% of the premium paid. Instead of receiving commissions from the insurance company, the life insurance buyers pays a fee.
“Life insurance without built-in commissions provides a meaningful alternative for buyers of large permanent life insurance policies, especially in the estate planning, premium finance and corporate owned life insurance markets.” Ted Bernstein“Back in 1982, Bernstein was sure he had an idea for a new service that would save consumers money. There was just one problem: it was bound to alienate all the people who would normally sell it…he started a campaign to explain his concept to other professionals to whom a wealthy person might go to for advice for life insurance: namely, lawyers, accountants and bankers in trust departments.” Martha Mangelsdorf, Inc.
Typical Uses of Life Insurance Without Commissions:
1. Buyers seeking large face amounts, in excess of $5,000,000.
2. Overfunding a permanent life insurance policy for retirement planning purposes.
3. Second to die policies, especially in excess of $5,000,000.
4. Premium financing.
5. Corporate Owned Life Insurance
premium financing, life insurance commissions
Give us a call at 561-869-4500 or email me at TB@LifeCyclePlanners to get started. I offer a complementary conversation about anything on your mind concerning your insurance coverage or succession plan.
Term Insurance Rates Are Remarkably Low! How Much Life Insurance Should You Buy? From Who?
It is important for consumers to have a good understanding of how inexpensive term insurance really is to own. Once you engage with a professional to start the process, a robust discussion will usually follow about “how much” coverage do you need to meet your goals and objectives. From there, you should learn about state of the art innovations to reduce premiums, create value and increase flexibility. Maximum flexibility and the ability to customize for most people, is more important than anything else.
The Installment Payout Option – Just one example: Most people buying life insurance today for income protection prefer to have the proceeds paid to their heirs in a partial lump-sum with the balance paid in equal, guaranteed installments over a time period they choose. Life insurance buyers now can control how the proceeds are paid to their beneficiaries at the time they purchase the policy. Until recently, beneficiaries were always paid in a lump-sum. Now, at the time of purchase, you instruct the insurance company to pay GUARANTEED, pre-determined payments over a time period you selected. The premiums can be up to 40% less, EVERY YEAR!
Things change as time goes by. The Installment Payout Option allows you to re-design the structure of payments at any time to meet the needs of your family, without underwriting.
Still, too many people are only concerned about the minimal premium differences among different insurance companies. They key is to work with a professional to first customize exactly what you need and want the policy to do in the short and long term. Not doing so is the equivalent of going into an auto dealership and demanding the least expensive car without first “building” the car to meet your unique goals and objectives. Worse is the fact that most people are not aware of these relevant innovations that can now be customized into your policy. More and more insurance companies are creating products that allow experienced professionals to design the perfect policy for you.
I offer a complementary consultation, by phone or in person, which is designed to help you explore the innovations that now exist and to determine if I am the right professional for you. I have 30+ years of experience that will ensure you end up with the perfect plan and products for you.
An excellent article in The New York Times Sunday Review
“But when it is a choice, the likelihood of choosing more time over more money — despite the widespread tendency to do the opposite — is a good sign you’ll enjoy the happiness you seek.”
Given the choice between more time or more money, which would you pick? For a beach vacation, you might pay more for a direct flight to gain a couple of extra hours getting sand between your toes. Read More…
Is Your Universal Life Insurance Policy Keeping You Awake?
Several months ago I began writing about a few life insurance companies that are increasing the insurance rates within certain policies. The highly unusual practice is contractually permissible but RARELY done. Some have started arguing, and suing carriers, suggesting it is not legal. I helped the Wall Street Journal and several other very well respected journalists with their coverage. It is an important topic for those impacted by these increases.
If you own a Universal Life policy and you are concerned about it, contact me and I will be glad to offer what I can to give you guidance. You can reach me at 561-869-4500 or email me at: EMAIL TED
Most policies are not in immediate danger of lapsing or needing higher premiums. IS YOURS?
Something interesting is happening that is worth mentioning. Some Whole Life salespeople are universal life bashing.
The problem here is NOT universal life. The problem is how insurance companies failed and fail to communicate with their policyholders about how to manage a universal life policy. The proper way to manage a Universal Life policy is easy to convey and communicate to every policyholder but the companies have left this very important issue up to their agents. Some agents do, too many don’t. What happens if your agent leaves the business? What happens if your agent forgets? Each and every year, the insurance company can mail you, email you and use all sorts of other tools to inform you that the policy may be underperforming. If you monitor the policy and make tweaks along the way, you won’t find yourself going over a cliff.
The issue:
Whole life costs more for the same coverage, it is not flexible, and will not be competitive when rates are moving up quickly. Its higher annual premiums prevent many people from ever getting permanent insurance. It simply costs too much for the majority of life insurance buyers.
If you put the same Whole Life premium into a Universal Life policy and a Whole Life policy for the same person, run at the same interest rate or dividend scale, and then compare them, they will perform almost identically. The guarantees in Whole Life are usually stronger for a difference that I do not consider to be very meaningful. Nearly every inforce Universal Life insurance policy in the U.S. (tens of millions or more) is not at the minimum interest rate and is not charging the guaranteed cost of insurance. The Whole Life companies are also nowhere near their guaranteed dividend scale, typically Zero percent.
Yet, every Whole Life policyholder is paying premiums as if the dividend scale was Zero percent. This means that Whole Life policyholders are OVERPAYING for insurance coverage to never have a premium increase to maintain their coverage. There is nothing wrong with that structure. Once people understand that they are paying for or will have to pay for guarantees that no insurance company is presently experiencing, most want a better option.
The BETTER option:
The better option is a flexible premium, adjustable life insurance policy that gives you the flexibility to add premiums if you need to, when you decide it makes sense. You make those coverage decisions with the guidance from a professional, at least once a year. By doing so, you will never be caught off guard and any changes can be met with a measured reaction. The result is that you will pay less for your coverage each year but retain the right to raise the premiums.
Who should own Whole Life insurance?
A simple question with a simple answer, finally. For my clients who know at the outset that meeting annually to discuss their coverage is less likely than not and those clients who don’t voluntarily save well, Whole Life is a good option. They will pay more to make sure any changes don’t negatively affect them and the Whole Life premium cannot be missed which helps some people create a forced savings.
So, why then should a person buy Universal Life over Whole Life? The answer is to pay lesser premium and have more flexibility. The difference in flexibility is not close. The higher premiums put into a Universal Life policy will essentially create identical values in the UL policy. By doing this, you will be overfunding the Universal Life policy which is exactly what the Whole Life policy does. The Whole Life company gives you a dividend to compensate for the increased premium they charged you.
It is this difference in flexibility that opens the door for Universal Life to be mismanaged and underfunded. It is not a matter of product superiority or inferiority.
My comments are not based on any type of inability to offer Whole Life. I am able to offer my clients nearly every whole life contract available in the market. I am not against Whole Life. I am for it when the client profile, goals and objectives warrant its use.
All life insurance should be monitored annually for numerous reasons. There once was a time when you could put a life insurance policy in a vault, pay the premiums and never think about it. That ship has sailed and for good reason. Even if we could go back to that time, is it in our best interest to do so? Absolutely not. From here we need to learn this valuable lesson about a product’s evolution and the NEED to monitor the policy with a professional, once a year. Once you get the hang of it and understand how the internal and external factors are impacting policy performance, the monitoring process is 15 minutes per policy with most of the work done by your insurance professional.
MY OFFER: I am offering you a 15 minute, no obligation phone call, to discuss any concerns you may have about your inforce coverage. I normally charge to do policy audits and I have been providing this service for 30+ years to individuals, attorneys, C.P.A.’s and trust companies. The Wall Street Journal has done a good job covering this Universal Life topic and I would be happy to email the articles to you, upon request. It is an honor to be quoted by such an esteemed business publication about a topic that I am very passionate about.
Ted Bernstein
Retirement Planning
561-869-4500 – Direct
