Income Protection Rethinking Buy Term and Invest the Difference

Transcription

1 Income Protection Rethinking Buy Term and Invest the Difference CAVALIER ASSOCIATES AS RETIREMENT UNCERTAINTY GROWS, PERMNENT LIFE INSURANCE EMERGES AS THE BEST RISK MAGEMENT TOOL FOR CONSUMERS THAT CAN EXTEND ITS USEFUL LIFE AT A REASOBLE PRICE. Income Protection and Retirement Uncertainty. The long-held belief by many CPA s and CFP s of buy term and invest the difference may be crumbling as retirement age is pushed further and further out for many individuals, and their term insurance expires while they still have an earned income to protect. Where this issue really rears its ugly head is for a client whose retirement is much less secure. These clients are likely to still be in their working years when their initial term insurance policy expires. expiration date - permanent insurance - is the superior option from the start in many cases, especially when one considers the costly alternative of buying a new term contract 10, 20 or 30 years after an initial term policy was purchased. In this ebook, By The Numbers: Rethinking Buy Term and Invest the Difference, we explore the question of providing income protection via either term or permanent insurance as the average retirement age continues to rise. The Cavalier Strategy Income Protection This group at the fat part of the bell curve needs a different solution, and buying a policy for cash accumulation is not the answer. They simply do not have the income to fund a contract at the level required, or they are too late in the game to really utilize the income-generating potential of a life insurance contract. An efficiently priced policy that has flexible premiums and no This research explores underwriting classes from A-rated carriers combined with targeted pricing data and quantifies the percentage of insureds who will see a degradation in their underwriting classes as they age. It ultimately shows why many people today in their 40 s and 50 s need to re-evaluate their income protection coverage. 1

2 Term vs. Permanent Protection: Insured Issue Ages The cost of an initial Term insurance purchase at rates for a 40-year-old male client. o nsmoker o Standard nsmoker purchased on a basis at ages 40 and funded on a level basis to age 75. scenarios the permanent solution represented a lower total outlay. In 33% of the scenarios below, the Current Assumption UL offers a lower total outlay in addition to a feature set that more closely matches the nature of the risk. Standard Table 4 Declined Standard Table 4 Client Buys (Expires no later than age 50) (Expires no later than age 60) (Expires no later than age 70) $ $ $1, Year Term $2, $2, $9, $3, $4, $12, $5, $9, $28, $46, $69, $119, $44, $140, $61, $173, $106, $327, All Scenarios *Financial underwriting can also become a factor in later insurance purchases. The income multiple used for financial justification for a client age 40 is far greater than a client in their 60 s or 70 s, where 2

3 Term vs. Permanent Protection: Insured Issue Ages The cost of an initial Term insurance purchase at rates for a 45-year-old male client. o nsmoker o Standard nsmoker purchased on a basis at ages 45 and funded on a level basis to age 75. scenarios the permanent solution represented a lower total outlay. In all Table 4 + Decline scenarios for 10 and 20-year term contracts, the Current Assumption UL offers a lower total outlay in addition to a feature set that more closely matches the nature of the risk. Standard Table 4 Declined Standard Table 4 Client Buys (Expires no later than age 55) (Expires no later than age 65) (Expires no later than age 75) $ $1, $2, Year Term $3, $5, $5, $8, $8, $15, $72, $120, $177, $80, $108, $178, *Financial underwriting can also become a factor in later insurance purchases. The income multiple used for financial justification for a client age 50 is far greater than a client in their 60 s or 70 s, where 3

4 Term vs. Permanent Protection: Insured Issue Ages The cost of an initial Term insurance purchase at rates for a 50-year-old male client. o nsmoker o Standard nsmoker purchased on a basis at ages 50 and funded on a level basis to age 75. scenarios the permanent solution represented a lower total outlay. In Table 4 + Decline cases for 10-year term contracts and all scenarios for 20-year term contracts, the Current Assumption UL offers a lower total outlay in addition to a feature set that more closely matches the nature of the risk. Standard Table 4 Declined Standard Table 4 Client Buys (Expires no later than age 60) (Expires no later than age 70) (Expires no later than age 80) $1, $2, $3, Year Term $4, $9, $6, $12, $11, $28, $74, $106, $182, $137, $171, $325, All Scenarios *Financial underwriting can also become a factor in later insurance purchases. The income multiple used for financial justification for a client age 50 is far greater than a client in their 60 s or 70 s, where 4

5 Term vs. Permanent Protection: Insured Issue Ages The cost of an initial Term insurance purchase at rates for a 55-year-old male client. o nsmoker o Standard nsmoker purchased on a basis at ages 55 and funded on a level basis to age 75. scenarios the permanent solution represented a lower total outlay. In Table 4 + Decline cases for 10-year term contracts, the Current Assumption UL offers a lower total outlay in addition to a feature set that more closely matches the nature of the risk. Standard Table 4 Declined Standard Table 4 Client Buys (Expires no later than age 65) (Expires no later than age 75) (Expires no later than age 80) $1, $3, $6, $5, $8, $15, $71, $98, $168, *Financial underwriting can also become a factor in later insurance purchases. The income multiple used for financial justification for a client age 55 is far greater than a client in their 60 s or 70 s, where 5