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How to choose the correct policy and juggle between your budget

on Thu, 11/10/2011 - 07:34

Haven't writen another blog for some time, it was quite busy and also attending the Small Business Summit had added extra pressure and workload as well....

Anyway, in order for you (the readers) understand how I function, I decided to write about the process of how I structured an insurance plan for a client....

So, this is a referral from another client, she was 53 at the time and she told me that her term policy would be up very soon. Considering her mortgage and everything, we decided to check the pricing of $300K coverage. What she had expiring at the time, was a Term-10 policy (a policy which the premium will rise every 10 years without any cash value). I suggested that since she will only get older day by day, it might be a wise idea to look into some permanent coverage. She agreed and indicated that all she can afford is about $200 a month for the premium. 

We did discuss about her needs in critical illness insurance coverage, I was not sure what I could structure on the spot, I started by quoting $300K permanent coverage from various companies, to give me an idea how much we are looking at FIRST, results as follows:

In my dictionary, premium pricing is NOT everything, I believe we have to get into something with values as much as we can. To me, the monthly premium is only a piece of the puzzle.

However, as we can see, the cheapest (SunUL) is still costing over $250 a month, with no cash value building in the policy :S

Of course, that will never work.... (at least in my opinion, even though I know some brokers will still present over budget solutions to clients, but that's just not me).

So I looked into some alternatives.... some mix on different coverages, this is what I found:

This is still kind of out of her budget... so I went to another route and came up with....

So there you go, after 2 days of structuring, I decided to present her 2 choices:

1. The BMO 100K permanent coverage, with a mix of 100K Term 10 & 100K Term 20 (gives her all the coverages she wants and within budget at this point), we will work our way to convert the Term 10 and Term 20 into a permanent coverage along the way. The idea is to have what we need for permanent converted within the time, so that we don't have to experience the huge jump in premium cost. This plan will also build cash value along the way, even though if we cannot do the conversions slong the way, the benefit will still grow, and by year 31 (after all the term coverages had dropped off), there will be a cash value of close to $50K in case she needs money down the road;

2. The BMO 100/100/100 mix as above, but adding a small $25K critical illness coverage, so that she will have some coverage instead of none right now, however, the down side of course, is that there will be no room for cash value build up. 

Of course, it is always the client's decision at the end of the day, but I do think the way I do my research, quotes and analysis, still benefits my clients in the long run :)

Do you have any comments on how I come up with this solution with this client? Do you have any suggestions to me how I can tailor it better if you were in this client's shoes? Let me know! 

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