Blog #49: More CheckMate® Selling

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(Presentations in this blog were created using the InsMark Illustration System and Life Plan System.)

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Editor’s Note:  All the InsMark illustrations available in this Blog were prepared using the Jazz release (Version 17.0) of the InsMark Illustration System.  We think you’ll like the new features.  Click here if you would like to learn more about the new features of Jazz.

Someone asked me recently if it’s possible to explain all you need to know about the powerful mathematics of cash value life insurance in a simple illustration.  We have such an illustration called Life Plan located on the Personal Insurance tab of the InsMark Illustration System.

Below are the results with the Life Plan module using an Indexed Universal Life policy insuring Harvey Pierce, MD, age 45.  It is a $500,000 policy (increasing death benefit) with premiums of $23,717 for 20 years.  Participating policy loans are illustrated starting at age 65.

blog-49-summary-of-pre-retirement-and-retirement-years-image

Click here to view the entire Life Plan illustration.

Note:  Life Plan is also available in Spanish.

Life Plan produces a lot of information in just a few pages.  While it produces a concise analysis, it ignores one of the most fundamental components of a good life insurance presentation -- it lacks a comparison.  Almost everyone makes better decisions in a comparative environment, so let’s introduce some comparisons to go with it.

We’ll select one of our most popular modules, Various Financial Alternatives (“VFA”), and compare the Indexed Universal Life to a:

  • Tax Exempt Account @ 3.00%
  • Taxable Account @ 6.00%
  • Tax Deductible Retirement Plan @ 7.50%

Below is a graphic of the results from age 45 to 95:

blog-49-Various-Financial-Alternatives-image

Click here to view the entire VFA illustration.

We are edging into what we call CheckMate® Sellingsample, i.e., anticipating a prospect’s objections before they are raised.  Various Financial Alternatives certainly helps in this regard.

The only remaining issue is likely “what about term insurance?”  So let’s add a comparison to term insurance and a side fund.  We’ll take the best of the alternatives, Tax Deductible Retirement Plan @ 7.50%, and couple it with $500,000 of 20-year level term insurance with an annual premium of $600, the kind of solution that Suze Orman prefers.  I can hear her now:

“Why would you pay almost $24,000 for something you could get for $600?”

This graphic tells you why:

blog-49-term-comparison-illustration-image

Click here to view the entire term comparison illustration.

Conclusion

Indexed Universal Life is a remarkable financial instrument.  The combination of Life Plan, Various Financial Alternatives, and a Term comparison make it irresistible for a prospect with the cash flow to acquire it.

Licensing

To license the InsMark Illustration System, contact Julie Nayeri at julien@insmark.com or 888-InsMark (467-6275).  Institutional inquiries should be directed to David Grant, Senior Vice President - Sales, at dag@insmark.com or 925-543-0513.

InsMark’s Digital Workbook Files

If you would like some help creating customized versions of the presentations in this Blog for your clients, watch the video below on how to download and use InsMark’s Digital Workbook Files.

Digital Workbook Files For This Blog

Blog49.zip

Download all workbook files for all blogs

Note:  If you are viewing this on a cell phone or tablet, the downloaded Workbook file won’t launch in your InsMark System.  Please forward the Workbook where you can launch it on your PC where your InsMark System(s) are installed.

InsMark’s Referral Resources
(Put our Illustration Experts to Work for Your Practice)

We created Referral Resources to deliver a “do-it-for-me” illustration service in a way that makes sense for your practice. You can utilize your choice of insurance company, there is no commission split, and you don’t have to change any current relationships. They are very familiar with running InsMark software.

Please mention my name when you talk to a Referral Resource as they have promised to take special care of my readers. My only request is this: if a Referral Resource helps you get the sale, place at least that case through them; otherwise, you will be taking unfair advantage of their generous offer to InsMark licensees.

Save time and get results with any InsMark illustration.  Contact:

Joint Interviews

If you want or need help from a qualified producer for joint interviews with any InsMark illustration and are willing to share the case, email us at bob@robert-b-ritter-jr.com, and we will provide you with recommendations.

Testimonials:

I have been using InsMark since it was a C:> prompt back in the early 1980s.  The new Jazz release is the most exciting upgrade to the system I’ve seen in 28 years!  With unlimited options for customization, you can now be as creative as you want when producing illustrations.  I downloaded it last night, and used it successfully with my first appointment this morning.
Chris Jacob,  CFP, InsMark Power Producer, SFI-Cadeau,  St. Louis, MO.

"Life Plan demonstrates an illustration that simply depicts the benefits of the basic life insurance policy.  It is an ideal program for the package sale.  I still run into individuals with a basic need for life insurance and cash value accumulation vehicles who are under the level where more complex planning is needed and who are not yet in the mindset for retirement distribution planning.”
Mel Gross,  CLU, ChFC, MSFS,  Houston, TX

"InsMark’s Life Plan presentation provides a valuable tool for our agents in discussing retirement plans with their clients.  Its concise and to-the-point design makes the concept very easy to understand.  And, having it available in both Spanish and English has proven to be extremely useful."
Zerita Reynolds,  CLU, ChFC, FLMI, LLIF, REBC, RHU Director, Advanced Markets,  Aviva USA

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More Recent Blogs:

Blog #48: Dollars of Benefits for Pennies of Cost

Blog #47: Tom and Kristin’s Retirement Planning

Blog #46: Let’s Make Sure the Girls Go to College

Blog #45: Controlled Executive Bonus Plan for
Life Insurance and Disability Income
(Part 5 of “Valuing the Business”)

Blog #44: Alternate Golden Handcuffs for Tom Hamilton
(Part 4 of “Valuing the Business”)

3 Reasons Why It’s Profitable For You To Share These
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Robert B. Ritter, Jr. Blog Archive

 

One thought on “Blog #49: More CheckMate® Selling

  • May 13, 2014 at 6:13 pm
    Permalink

    “Bob,

    Your blogs are fascinating!

    Until I took apart a life insurance illustration, I really did not understand how the following was possible:
    • How can the yield of the CSV increase beyond the illustrated rate?
    • Why does the CSV decrease during the distribution phase, and then, at some point, begin to increase to beyond what is was when the distribution phase began?
    • Why does the Account Value never decrease?
    • And why is the distribution percentage ratio (distribution divided by the CSV) so high when compared to the so called “rule of 4%”?
    For example, in a recent illustration for a 35-year old individual, the distribution percentage of the ING Global Choice (an IUL) begins at 12.74% at age 70 ($205,923/$1,608,332), increases to 32.3% (!) at age 89 ($205,923/$638,670), and then drops to 6.97% at age 100 ($205,923/$2,953,166). But note that the CSV is almost twice what is was at age 70.

    So I pondered. Were they using quantum mechanics? A process where what is observed seem to go against the laws of nature?

    Nothing that exotic. The answer is the same for all of the questions: Arbitrage.

    I avoided explaining this remarkable tool as I really initially did not understand it myself. I understand how the banks use arbitrage. But arbitrage on the same instrument?

    So now I explain it to my clients in the following manner: “You are not borrowing your money. You are borrowing from the company itself, and the money in your policy is used as collateral. That is the reason your Account Value never decreases. You are receiving the yield on 100% of that money less expenses. The interest charge on the borrowed money is a separate transaction.”

    I then actually see the light bulb go on. They almost always say, or some semblance of, “Oh, now I get it. What a neat trick!”

    But what I have never seen, in all of what I have read, is an explanation of just why the distribution ratio is as high as it is. Perhaps it is because the writers themselves don’t want to point it out because they will be asked how it is possible that it is so high.

    But I think it is important that it not only be pointed out, but emphasized! It is one of the most powerful selling points. Could you imagine a securities rep recommending that high a distribution ratio? He would probably go to jail!
    I hope you enjoyed reading this as much as I enjoyed writing it.

    Regards,

    Stan”
    ————————————-
    Hi Stan,

    You answered most of your early questions in your Comment.

    Relative to the distribution ratio, it’s high with the typical IUL because the basis for it is the continuing high accumulation rates, say, 7.00% to 7.50%, with the typical IUL illustration. I have never seen it illustrated by a carrier, but probably the only way to show it as you think it should be would be to allow the user to reduce the policy’s interest assumption to, say, 4.00% or 5.00%, during distribution years.

    But I also think you could accomplish what you want though by targeting loans at retirement to 4% of the cash value at retirement. The illustrated policy values would grow considerably beyond their value at the beginning of the distribution phase (using the same 7.00% to 7.50% interest assumption as the pre-retirement phase), but the excess cash value should explained as a conservative safety valve.

    Alternatively, illustrate the policy only for the accumulation phase, and discuss with the client that a 4.00% withdrawal and/or loan is the safest way to proceed. In this case, it would be no different than an investment adviser telling a client with a $1,000,000 equity account the client believed would grow at a 7.00% to 7.50% that a 4.00% withdrawal is the safe amount to withdraw. The difference being that the investment adviser is unable to project the growth of the equity account due to FINRA-type prohibitions, and the life insurance community is allowed to illustrate growth in all years with any cash value product.

    I did enjoy your thinking on the subject.

    Bob Ritter

    InsMark President

    Reply

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