{"id":6860,"date":"2019-09-23T10:51:13","date_gmt":"2019-09-23T15:51:13","guid":{"rendered":"https:\/\/www.figmarketing.com\/blog\/?p=6860"},"modified":"2023-04-04T11:20:03","modified_gmt":"2023-04-04T16:20:03","slug":"when-the-term-fits-dont-always-wear-it","status":"publish","type":"post","link":"https:\/\/www.figmarketing.com\/blog\/when-the-term-fits-dont-always-wear-it\/","title":{"rendered":"When the Term Fits, Don’t Always Wear It [Case Study]"},"content":{"rendered":"\n

Updated April 4, 2023, at 12:19 PM<\/em><\/p>\n\n\n\n

Having been in the life insurance industry just over 16 years, I\u2019ve seen my share of cases where simple arithmetic can either win or lose a case. Many times, it all comes down to math & financial sense. Recently I had a request for a $1,000,000, 20-year term life insurance policy on a 60-year-old male. <\/p>\n\n\n\n\n\n\n\n

For someone in great health and with a temporary death\nbenefit need, this would typically be a no brainer: buy the cheapest term you\ncan find. Unfortunately, this client was, at best, a table \u201cB\u201d rating on term\ndue to type 2 diabetes and being moderately overweight. <\/p>\n\n\n\n

On the rated term plan his premium would have been $10,641 per year or possibly worse. Even with his medical situation, his life expectancy could likely put him living beyond the 20 years, making his total net cost for the term $212,832. Outliving a term life insurance policy can be a significant gamble for a client, and for this client it would be quite a financial hit when it\u2019s all said and done.<\/p>\n\n\n\n

Related: Finding the Right Indexed Universal Life Policy<\/a><\/h4>\n\n\n\n

With a little brainstorming and shopping around, I found him a standard offer on permanent coverage using a table shave program. Table shaving is hard to come by these days, as only a few carriers still have a \u201ctrue\u201d table shave program where slightly rated offers automatically go to standard. We were able to find him a minimally-funded indexed universal life policy, paying $16,547 per year. <\/p>\n\n\n\n

That Sounds Crazy, Right? <\/h2>\n\n\n\n

Look at it this way: On current costs and expenses, and only a 1% (minimum guaranteed) return, his net surrender value at the end of 20 years would be $117,998. That practically breaks even for what he would have paid on the term. Not to mention, he had cash value and access to policy loans all along. <\/p>\n\n\n\n

Then, consider with an 8.75% CAP on the S&P 500 and estimated average returns of 6%, he\u2019ll likely walk away at the end of the 20 years with close to $239,927 net surrender value! This makes his net annual premium cost around $4,550 if he surrenders and walks away after 20 years. He also has permanent life insurance if his needs change and he wants to keep it longer, or if his health deteriorates. <\/p>\n\n\n\n

Final Thoughts<\/h2>\n\n\n\n

It really was a win-win for the client and the advisor (who makes a higher commission on permanent versus term life insurance), all while improving the client\u2019s financial picture long-term\u2014which is always our top priority. <\/p>\n\n\n\n

Sometimes, we need to look outside of term for a term need,\nand with his medical history and an underwriting niche from one of our top\ncarriers, everybody won! <\/p>\n\n\n\n

Keep Reading: Case Study: A Black Cloud over Life Settlements<\/a><\/h4>\n\n\n\n
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Updated April 4, 2023, at 12:19 PM Having been in the life insurance industry just over 16 years, I\u2019ve seen my share of cases where simple arithmetic can either win or lose…<\/p>\n","protected":false},"author":63,"featured_media":6865,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[362],"tags":[220,194,108,210],"acf":[],"_links":{"self":[{"href":"https:\/\/www.figmarketing.com\/blog\/wp-json\/wp\/v2\/posts\/6860"}],"collection":[{"href":"https:\/\/www.figmarketing.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.figmarketing.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.figmarketing.com\/blog\/wp-json\/wp\/v2\/users\/63"}],"replies":[{"embeddable":true,"href":"https:\/\/www.figmarketing.com\/blog\/wp-json\/wp\/v2\/comments?post=6860"}],"version-history":[{"count":11,"href":"https:\/\/www.figmarketing.com\/blog\/wp-json\/wp\/v2\/posts\/6860\/revisions"}],"predecessor-version":[{"id":12366,"href":"https:\/\/www.figmarketing.com\/blog\/wp-json\/wp\/v2\/posts\/6860\/revisions\/12366"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.figmarketing.com\/blog\/wp-json\/wp\/v2\/media\/6865"}],"wp:attachment":[{"href":"https:\/\/www.figmarketing.com\/blog\/wp-json\/wp\/v2\/media?parent=6860"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.figmarketing.com\/blog\/wp-json\/wp\/v2\/categories?post=6860"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.figmarketing.com\/blog\/wp-json\/wp\/v2\/tags?post=6860"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}