Case Study and Sales Ideas in
Life Insurance
Donna Thorne, CHS, EPC
Senior Business Development
Agenda
Value added term insurance
Case Study
Insurance Needs Calculator Premium Matchmaker
Value Added Term 30
Term or Perm?
The age old question….
Conversion considerations
Illustration software Product options
Value Added Term Insurance
• Alan is a single Dad of two
children;
• Alan (35) has a 500,000
insurance need
• He may have a need for
insurance at age 65
Value Added Term Insurance
Standard Non Smoker Rates
500,000 sum insured
Term 10 year 20 year 30 year
Years 1 to 10 285 $ 470 $ 860 $
Years 11 to 20 1 980 $ 500 $ 860 $
Years 21 to 30 4 475 $ 7 960 $ 860 $ Years 31 to 40 11 740 $ 7 960 $ 16 770 $ Years 41 to 50 39 130 $ 44 040 $ 16 770 $ Years 51 + policy expires policy expires 16 770 $
Considerations when choosing between 10, 20 or 30 year term
• How long is the insurance need for?
• Does the client qualify for Preferred or Preferred Plus?
• The possibility of qualifying for insurance in the future at standard rates
– Family History? – Travel?
– Lifestyle?
It is cost effective to purchase Term 10 every 10 years but you must not only qualify but obtain the same risk category.
Value Added Term Insurance
• Term 30 with guaranteed T100 rates at renewal•
Standard Preferred Preferred Plus 860 $ 770 $ 675 $
• After 30 years (age 65) the client is faced with 4 options if he wishes to remain insured:
1) Apply for a new policy; if he is insurable;
2) Convert into a permanent product offered at the time; 3) Keep his existing policy at guaranteed T100 rates;
Value Added Term Insurance
Standard Preferred Preferred Plus
Annual 3 689 $ 3 346 $ 3 068 $
Monthly 332 $ 301 $ 276 $
• It is possible to reduce the insurance amount to the 100,000 minimum • Rates are guaranteed for 100,000 at age 65
Permanent Products currently available for conversion;
actual premiums at age 65
Standard Preferred Preferred Plus
Preferred Term 30 (PT30)
• Renewable and Convertible
• At year 30 … Policy renews to a T100 plan (Fully guaranteed
T100 rates at the time of issue of the PT30 policy)
• Preferred rates available for coverage as low as $100,000 • Conversion to any eligible permanent plan without further
evidence of insurability • Fully paid up at age 100
Against the Competition
At First Renewal
BMO Insurance Policy renews to a T100 plan to age 100
Company A Policy renews to a T10 plan to age 80
Company B Policy renews to a YRT plan to age 100
Company C Policy renews to a T100 plan to age 100
Company D Policy renews to a T30 plan to age 85
Companies Surveyed: BMO Insurance, Desjardins Financial, Foresters, Industrial Alliance and Transamerica.
The comparison was performed based on information believed to be reliable and in effect as of August 23, 2012. BMO Life Assurance Company is not liable for any errors or omissions in the information derived from third party source.
Case Study …
Male Non-Smoker 35,
$500,000
Monthly Premium At First Renewal
BMO Insurance $77.40 Renews to a T100 plan to age 100
Company A $78.75 Renews to a T10 plan to age 80 Company B $79.65 Renews to a YRT plan to age 100 Company C $78.75 Renews to a T100 plan to age 100 Company D $75.60 Renews to a T30 plan to age 85
Sometimes … the cheapest premium is not always the best.
For less than $2 per month more … give your clients peace of mind with our PT 30.
Companies Surveyed: BMO Insurance, Desjardins Financial, Foresters, Industrial Alliance and Transamerica.
The comparison was performed based on information believed to be reliable and in effect as of August 23, 2012. BMO Life Assurance Company is not liable for any errors or omissions in the information derived from third party source.
Case Study …
Male Non-Smoker 35,
$500,000
Face
Annual Premium at Age 65
Preferred Term 30 Cheapest UL in today’s market1 $500,000 16,770 15,166 $400,000 13,843 12,157 $300,000 10,401 9,149 $200,000 7,303 6,236 $100,000 3,689 3,206 100% Fully Guaranteed Not Guaranteed
1 Source: LifeGuide August 23, 2012
Compensation
First Year Commission Years 2 to 5 Years 6 to 30 Year 31 Preferred Term 3045%
2% 2% 10% LB 10 and 20 LB CI riders45%
2.50% 2.50% 2.50% Other Supplementary Benefits35%
5% 0% 0%The industry’s future outlook for T100 and LCOI
plans is uncertain.
Give your clients peace of mind!
Our Preferred Term 30 will give your clients
access to a T100 plan … 30 years from now.
Value Added Term Insurance…In other words..
• If we were to use a house analogy:
– Term insurance is like renting
– Permanent insurance is like owning
– BMO’s Term 30…
…like renting with the option to buy at a
Term or Perm ?
People want economy and they will pay
any price to get it.
Lee Iacocca
Case Study
• Male 45 NS
• Has an insurance need for the next 20 years;
• There is a possibility that the need may become permanent;
• The client has strong cash flows and he loves getting a deal!
Term 20 or T100 Platinum?
T20 T100 Platinum
• Annual Premium
$625
$3,628
• CSV before tax
-
$97,000
(after 20 years; i.e.beginning of year 21)
• Tax
(48,22 % of 47 529 $)-
$22,918
– Taxable amount (CSV-ACB); 97 000 $ - 49 471$* $ = 47 529 $
• After tax CSV
$74,082
Male 45 NS, Sum Insured: $250,000
Term 20 or T100 Platinum?
T20 T100 Platinum
• Annual Premium
$ 625 $3,628
• Total premiums after 20 yrs*
$12,500 $76,188
• After tax CSV after 20 years $0
$74,082
• Net Cost after 20 years
$12,500 $ 2,106
A difference of $10,394
* In the case of the T100 Platinum 21 premiums were paid
Options available in 20 years
1. Continue paying premiums in order to keep the policy in
force
- The cash values in the Platinum T100 will continue to grow by $4,375/yr on average while the premium remains at $3,628; - Convert the T20: Premium is $8,630/yr (T100 Plus)
1. Reduce the sum insured to the $25,000 floor
– The annual premium goes down to $430.25;
– A proportional cash value will be paid out of $66,674 after tax
1. Reduced paid-up: $166,250
2. Reduced paid-up to the $25,000 floor
– No additional premiums required;
Whole Life Solutions: Simple and Transparent!
• 20 Pay Life (Age 0 to 65, Singe Life)
– Fully Paid up in 20 years – CSV and RPU after 10 years
– Contractual guaranteed premiums, CSV, and benefits
• Term 100 Platinum (Age 0 to 75, Single)
– Fully Paid up at age 100
– CSV and RPU as early after year 4
– Contractual guaranteed premiums, CSV, and benefits
• Term 100 Plus (age 18 to 75, Single)
– Fully Paid up at age 100
– CSV and RPU as early after year 4
Term 100 Plus Case Study: Female 70, N/S, $750,000
7.14% Div 5.14% Div
IRR = 6.67 %
Term 100 Plus Case Study: Female 70, N/S, $750,000
IRR = 6.67 %
IRR = 4.93 % IRR = 3.63 %
20 Pay Case Study: Male 18, N/S, $200,000
BMO Insurance 20 Pay
• $200,000 Face
• Annual Premium $1,129 (20 pay) • GCSV @ Yr 20 = $20,026
Competitor 20 Pay PAR Whole Life
• $57,180 Face
• Annual Premium $1,129 (20pay) • GCSV @ Yr 20 = $14,253 • Current Dividend (7.14%) DB = $200,000 at age 54 • Current Dividend -1% DB = $200,000 at age 66 • Current Dividend -2% DB = $200,000 at age 100
Products currently available for Conversion
• Life Dimension Universal Life
• T100 Platinum
• T100 Plus
• 20 Pay
Important:
Currently, Pure Term 100 and Life Provider Universal Life products are not available for conversion.
Most economical products for conversion
Male
Sum Insured: $100,000Age Non-Smoker Annual Premium Non-Smoker Monthly Premium Smoker Annual Premium Smoker Monthly Premium
50 Life Dimension Life Dimension Life Dimension Life Dimension
55 Life Dimension Life Dimension T100 Plus Life Dimension
60 Life Dimension Life Dimension T100 Plus Life Dimension
65 T100 Plus Life Dimension T100 Plus T100 Plus
Most economical products for conversion
Female
Sum Insured: $100,000Âge Non Smoker Annual Premium Non Smoker Monthly Premium Smoker Annual Premium Smoker Monthly Premium
50 Life Dimension Life Dimension Life Dimension Life Dimension
55 Life Dimension Life Dimension Life Dimension Life Dimension
60 Life Dimension Life Dimension T100 Plus Life Dimension
65 T100 Plus Life Dimension T100 Plus Life Dimension
Life Provider – Case Study
Client Profile
• Daniel and Marie (both 35) have been married for 3 years
• Daniel was recently promoted to manager earning $62,000 per year • Marie is a part-owner of a small
business and earns $48,000 per year • They have a new born son, Henry
Their Current Situation
• Their home's current Fair Market Value: $350,000
• Outstanding mortgage balance: $179,000
• Line-of-credit balance: $11,000
• Credit card debt (average monthly balance): $2,500 • Existing life insurance:
• Daniel (group life): 1.5 times salary
• Marie None
Assessing their needs…
• Ensure their mortgage is paid off, in case either one dies prematurely.
• Provide an income replacement equal to 70% of 10 years of lost salary
• Eliminate other debt in the event of death • Start an insurance plan for Henry
• Have access to emergency funds, in the event of a serious illness or death
A LifeProvider Solution…
• Permanent life insurance required:
• $150,000 (Joint First-to-Die)
• Term 20:
• Daniel: $350,000 (Single Life) • Marie: $350,000 (Single Life)
• Living Benefit Riders:
• $25,000 for both Daniel and Marie
• Children’s Term Rider:
• $25,000 on Henry's life
• Plus, using BMO’s Investor Profile Questionnaire…
An All-in-One Insurance and Savings Plan
Insurance Charges: $188
Monthly Savings: $47
_______________________ Monthly commitment: $235
Easy-to-Manage Investment Options
Information at your fingertips!
After 2 years…
• Marie's mother is diagnosed with Alzheimer's Disease • Marie's LifeProvider policy with a CI rider allows
her mother to get a professional opinion from Best Doctors on possible new or different treatments.
• This valuable service is provided through BMO Insurance even though her mother is not a client.
• Marie is also able to access Helping Hands for some support information on dealing with
When Daniel turns 50…
• He is diagnosed with colon cancer and is unable to work full-time during his 12 months of treatment
• Because he can still work, Daniel cannot make a claim under his group disability plan
• After only a 30 day waiting period, he receives a
cheque for $25,000 from his BMO Insurance Benefit coverage
• Plus, there is over $5,000 in Cash Value in their plan which provides temporary relief from their insurance charges*
Additional Assistance Services
• Best Doctors reviews his treatment and recommends a new drug treatment not widely used in Canada
• Helping Hands provides Daniel and Marie with stress counseling services through this difficult time
• Helping Hands also provides Daniel with a nutritional guide for a healthier lifestyle
Each of these services saved thousands of dollars in costs and valuable time searching
Picking up the Pieces…
• Daniel returns to work after a year with minimal disruption to his family's finances • Daniel and Marie restart their premium
payments without any increase to their premiums or without having to re-qualify for their existing coverage
When Henry graduates from university…
• The $25,000 Children's Term Rider allows Henry to convert to up to $125,000 of permanent coverage without any further evidence of insurability.
When Daniel and Marie retire…
• They start to think about protecting the
value of their estate…and how to maximize
Henry’s inheritance
• As a result, they convert their Joint
First-to-Die coverage to Joint Last-to-Die
using the Joint Last-to-Die Conversion rider¹…
at issue age rates!
LifeProvider:
Call us for more information…
ONTARIO REGIONAL SALES OFFICE 1-800-608-7303
QUEBEC-ATLANTIC REGIONAL SALES OFFICE 1-866-217-0514
WESTERN REGIONAL SALES OFFICE 1-877-877-1272
Information contained in this document is for illustrative purposes and is subject to change without notice. Refer to an up-to-date policy illustration for this plan for a current statement of benefits.
Insurer: BMO Life Assurance Company.
