LIFE INSURANCE

[ckmk47]

When I was younger and a stay at home Mom, I was insured for enough to pay for a housekeeper and babysitter for a few years. 

[Euclid]

I need a new insurance agent. I currently have $1.25m and my wife $1m - he should've been telling to up my policies.

[dm123]

I need a new insurance agent. I currently have $1.25m and my wife $1m - he should've been telling to up my policies.

Probably a very tough balancing act for agents.
Tell people they need to up their coverage and they're a pushy salesman trying to sell more policies.
Don't say anything people won't have the coverage they need.

[dm123]

When I was younger and I a stay at home Mom, I was insured for enough to pay for a housekeeper and babysitter for a few years.

100% - Where's that video showing the dozens of jobs it would take to try and replace a mother?

I would add to this an amount to be able to pay people to do items he or she typically does. It may not be practical to rely on a husband with a full time job that may require overtime to be able to take care of children all afternoon.

Yep - fathers should also take into account they're also not just a money machine, need to account for tutoring/chavrusa's for homework help etc.

[aygart]

100% - Where's that video showing the dozens of jobs it would take to try and replace a mother?

Yep - fathers should also take into account they're also not just a money machine, need to account for tutoring/chavrusa's for homework help etc.

Yes, that was meant as an example that goes both ways.

[ExGingi]

I need a new insurance agent. I currently have $1.25m and my wife $1m - he should've been telling to up my policies.

Maybe yes and maybe not. Ideally insurance coverage should be reviewed periodically and whenever there's a change in circumstances. Let me correct that statement: it should be reviewed whenever there's a change in circumstances, and since most people don't put insurance review on their to-do list with every change in circumstances, it's a good idea to do it periodically (use the annual statements as a reminder).

[ExGingi]

100% - Where's that video showing the dozens of jobs it would take to try and replace a mother?

Yep - fathers should also take into account they're also not just a money machine, need to account for tutoring/chavrusa's for homework help etc.

And potential reduced earning capacity due to need to dedicate more time/attention/resources to the family. That is why insurance companies will agree to insure a non-working spouse for anywhere between 50% to 100% of the amount the working spouse is eligible for.

[Yosel]

I need a new insurance agent. I currently have $1.25m and my wife $1m - he should've been telling to up my policies.

did you reach out to your current agent? that is what you should do. IMO if he is not around anymore, is a  different story

[dm123]

did you reach out to your current agent? that is what you should do. IMO if he is not around anymore, is a  different story

Definitely should reach out and give opportunity to explain if upping coverage is necessary or not and if necessary to explain why agent hasn't reached out - but I would imagine making sure a client has necessary coverage is basic part of the job and if no good explanation wouldn't it be reasonable to find a new agent?

[ExGingi]

but I would imagine making sure a client has necessary coverage is basic part of the job and if no good explanation wouldn't it be reasonable to find a new agent?

Part of it might be how the agent viewed you as a client in his sales experience. Were you appreciative of the agent and referred others? If an agent has to classify his clients as A B and C, I would not be surprised if the agent isn't diligent about following up with C clients.

[dm123]

Part of it might be how the agent viewed you as a client in his sales experience. Were you appreciative of the agent and referred others? If an agent has to classify his clients as A B and C, I would not be surprised if the agent isn't diligent about following up with C clients.

That's fine but if the client is indeed being treated (rightfully so, for arguments sake) as a C client shouldn't the agent explain that if client asks why there is no follow up - and wouldn't that be grounds for looking for an agent that will treat client as an A client? (Perhaps the client should work on his bein adam lechaveiro about being a better client if that was the issue but not sure that's relevant to this thread?)

[dm123]

That's fine but if the client is indeed being treated (rightfully so, for arguments sake) as a C client shouldn't the agent explain that if client asks why there is no follow up - and wouldn't that be grounds for looking for an agent that will treat client as an A client? (Perhaps the client should work on his bein adam lechaveiro about being a better client if that was the issue but not sure that's relevant to this thread?)

On second thought wouldn't the client have a right to know immediately that he'll be treated as a C client for ABC reasons and if client wants an annual review/etc client should be on top of it as agent has more "worthwhile" clients to work with? (obviously everyone involved should say these things in a much nicer way, I'm just speaking bluntly on this thread)

As well if client is notified immediately wouldn't he be more likely to begin behaving as an A client (being more appreciative/referral/etc) to tap into A client benefits?

[aygart]

Was the client not an A client because the agent was not an A agent?

[ckmk47]

Perhaps the agent didn't follow up because he's not so on top of his game?
So perhaps he's not as on top of insurance information? Or perhaps its his sales abilities that aren't great, but he's very knowledgeable about insurance.


Giving him a call to ask if it's time for a review, kind of sets you up to use him.
You can hear what he's got to say.  Then are you going elsewhere to compare?  and what if both say about the same thing? who do you buy form?

[farmbochur]

For amount of insurance, here is an example from one company. Most companies are similar with slight differences either in age brackets or multiples.

Obviously an insurance company is going to push higher face amounts.

1. Insurance needs should be expressed as a multiple of annual expenses (plus anticipated big ticket items) rather than gross earnings. For many, this could reduce the face amount by 40-50% just by accounting for taxes and retirement savings.

2. Insurance needs should be offset by existing savings.

3. Why would you push a 40x multiple of earnings? That implies a miniscule 2.5% safe withdrawal rate or possibly even less if there are accumulated assets.

[dm123]

1. Insurance needs should be expressed as a multiple of annual expenses (plus anticipated big ticket items) rather than gross earnings. For many, this could reduce the face amount by 40-50% just by accounting for taxes and retirement savings.

1) Some would say it's meant to replace the income (or future income potential) of the insured - NOT to cover someone's unreasonable lifestyle expectations (similar to home insurance - they cover what the home is worth/replacement value - not the home you want to build in the future)

2) What do you mean save on taxes? Is the plan to use principal of insurance payout or live off the income generated by the principal?

3. Why would you push a 40x multiple of earnings? That implies a miniscule 2.5% safe withdrawal rate or possibly even less if there are accumulated assets.

If the income generated by insurance principal is used to live off - wouldn't one want their family to have a safe/low volatility asset paying it out? Usually those have much lower returns so why is 2.5% safe withdrawal rate wrong to assume?

[skyguy918]

Obviously an insurance company is going to push higher face amounts.

1. Insurance needs should be expressed as a multiple of annual expenses (plus anticipated big ticket items) rather than gross earnings. For many, this could reduce the face amount by 40-50% just by accounting for taxes and retirement savings.

2. Insurance needs should be offset by existing savings.

3. Why would you push a 40x multiple of earnings? That implies a miniscule 2.5% safe withdrawal rate or possibly even less if there are accumulated assets.

+1

If you want of course you can use an income focused calculation, but it's not in keeping with why most people buy life insurance. Most singles aren't buying life insurance, because the need for coverage isn't there. That implies that the coverage need is not income replacement but rather for spouse/dependents to be able to cover expenses.

1) Some would say it's meant to replace the income (or future income potential) of the insured - NOT to cover someone's unreasonable lifestyle expectations (similar to home insurance - they cover what the home is worth/replacement value - not the home you want to build in the future)

He's talking about where the expense approach is lower than the income replacement approach. If an expense based calculation yields higher coverage needs than an income based calculation, you're very likely to either not get approved for such high coverage, or not be able to afford it.

2) What do you mean save on taxes? Is the plan to use principal of insurance payout or live off the income generated by the principal?

If the income generated by insurance principal is used to live off - wouldn't one want their family to have a safe/low volatility asset paying it out? Usually those have much lower returns so why is 2.5% safe withdrawal rate wrong to assume?

Why only live off the principal? Is the surviving spouse expecting to live forever?

[ExGingi]

Obviously an insurance company is going to push higher face amounts.

This is so wrong (in this context - this is part of an UNDERWRITING guide). While insurance sales departments would love to sell as much insurance as possible, they in no way want to over-insure ANYONE, which is where financial underwriting comes into play. These numbers are THE MAXIMUM an insurance company will consider a person for (unless some plausible explanation exists to insure for more than these multiples). Obviously anyone can chose to protect themselves for LESS THAN WHAT THEY'RE WORTH, but to an insurance company looking at numbers, this is the general rule of thumb of what a person is worth in dollars and cents.

1. Insurance needs should be expressed as a multiple of annual expenses (plus anticipated big ticket items) rather than gross earnings. For many, this could reduce the face amount by 40-50% just by accounting for taxes and retirement savings.

Based on that logic, if someone has a fully paid for $100,000 vehicle which they use to drive to work, it should only be insured for an amount that it would cost to get alternate transportation, even if that would be for a much lesser vehicle. And if a person has some money saved up, maybe they should forgo the insurance altogether, because they can self-insure.

2. Insurance needs should be offset by existing savings.

3. Why would you push a 40x multiple of earnings? That implies a miniscule 2.5% safe withdrawal rate or possibly even less if there are accumulated assets.

Again, this is talking about needs (which no-one can accurately predict for the future) vs actual current financial value.

If a person is earning $100,000/yr, and is young, it is reasonable to anticipate that their earned income will increase over the years. The multiples quoted above take that into consideration. If you're only focusing on needs and the person earning $100,000/yr only needs $60,000 to live on, where is the rest of the money going?

I have yet to hear about a person who received a death benefit complaining that it is too large, and they don't have what to do with the money. OTOH I am aware of two young widows, one who's husband left a life insurance death benefit which was sufficient to generate enough income with 0 risk and without need to touch the principal or make a fundraising campaign, and another who's husband left a smaller death benefit who will need to figure out how she gets by even after the death benefit and the money raised in a fundraising campaign.

[Euclid]

I am aware of two young widows, one who's husband left a life insurance death benefit which was sufficient to generate enough income with 0 risk and without need to touch the principal or make a fundraising campaign, and another who's husband left a smaller death benefit who will need to figure out how she gets by even after the death benefit and the money raised in a fundraising campaign.

Can you disclose on the amounts of the death benefits? I'm curious what the numbers are

[ExGingi]

That's fine but if the client is indeed being treated (rightfully so, for arguments sake) as a C client shouldn't the agent explain that if client asks why there is no follow up - and wouldn't that be grounds for looking for an agent that will treat client as an A client? (Perhaps the client should work on his bein adam lechaveiro about being a better client if that was the issue but not sure that's relevant to this thread?)

In case it wasn't obvious until now, let me clarify what a C client means. It is a money-losing client. It is a client who take more time, effort and cost to service than any revenue or referrals generated by such client. This has nothing to do with policy size or cost. Do you really think an agent needs to explain to such a client that he is such a client?

No agent will go into someone expecting them to be a C client at the outset. Everyone starts off as a potential B client. And any good agent will want to have lots of B clients. Some of those B clients will turn into A clients.