As insurance professionals, we are faced with many questions and
options
on what is the best financial solution to meet our clients' needs. One
of the most common questions in Life Insurance is, "Buy Term or
Permanent, which is better?" AppMan©
has put the pencil to the paper to prove the answer.
Of course many factors need to be evaluated to provide your client the
most appropriate coverage. Is the need for the life insurance
permanent or temporary? In the case of business insurance or
personal loan protection, the need is often times temporary. After
the temporary need period, are there additional, unexpected or unplanned
for needs for continuous coverage? Certainly you know of clients
that have carried term insurance for many years where all of a sudden
the initial level term period has expired and they are disappointingly
surprised at the renewal premiums. Additionally, they find
themselves older, with more health concerns, and due to growth in their
estate or income earning power, they need more coverage or at least
continuation of coverage. Just to find out premiums for a new plan are
3-10 times that of what they have been paying for their existing term
plan.
We are going to dive deep into
the numbers here today. Truly, what is better: Term Life Insurance
or Permanent Life Insurance?
We will use the following data in our model:
- $250,000 Face Amount
- Initial Issue Age 35 Male Standard Risk
Class
- Term Life:
10 Year Guarantee level term, renewing each 10 years (with
required underwriting)
- Universal Life: No-Lapse Fixed
Index Universal Life, Lifetime Guarantee
- Whole Life: Traditional Whole
Life using Paid-Up-Additions, Lifetime Guarantee
Let's look as the data:
|
|
Term Life |
|
Universal Life |
|
Whole Life |
|
Age |
Premium |
Cumulative Premium |
Projected Cash Value |
|
Premium |
Cumulative Premium |
Projected Cash Value |
|
Premium |
Cumulative Premium |
Projected Cash Value |
|
35 |
$241.50 |
$241.50 |
$0.00 |
|
$1,237.00 |
$1,237.00 |
$582.00 |
|
$2,675.00 |
$2,675.00 |
$0.00 |
|
36 |
$241.50 |
$483.00 |
$0.00 |
|
$1,237.00 |
$2,474.00 |
$1,191.00 |
|
$2,675.00 |
$5,350.00 |
$0.00 |
|
37 |
$241.50 |
$724.50 |
$0.00 |
|
$1,237.00 |
$3,711.00 |
$1,824.00 |
|
$2,675.00 |
$8,025.00 |
$2,000.00 |
|
38 |
$241.50 |
$966.00 |
$0.00 |
|
$1,237.00 |
$4,948.00 |
$2,485.00 |
|
$2,675.00 |
$10,700.00 |
$4,539.00 |
|
39 |
$241.50 |
$1,207.50 |
$0.00 |
|
$1,237.00 |
$6,185.00 |
$3,180.00 |
|
$2,675.00 |
$13,375.00 |
$7,348.00 |
|
40 |
$241.50 |
$1,449.00 |
$0.00 |
|
$1,237.00 |
$7,422.00 |
$3,908.00 |
|
$2,675.00 |
$16,050.00 |
$10,180.00 |
|
41 |
$241.50 |
$1,690.50 |
$0.00 |
|
$1,237.00 |
$8,659.00 |
$4,673.00 |
|
$2,675.00 |
$18,725.00 |
$13,386.00 |
|
42 |
$241.50 |
$1,932.00 |
$0.00 |
|
$1,237.00 |
$9,896.00 |
$5,476.00 |
|
$2,675.00 |
$21,400.00 |
$16,643.00 |
|
43 |
$241.50 |
$2,173.50 |
$0.00 |
|
$1,237.00 |
$11,133.00 |
$6,318.00 |
|
$2,675.00 |
$24,075.00 |
$19,957.00 |
|
44 |
$241.50 |
$2,415.00 |
$0.00 |
|
$1,237.00 |
$12,370.00 |
$7,234.00 |
|
$2,675.00 |
$26,750.00 |
$23,580.00 |
|
45 |
$421.50 |
$2,836.50 |
$0.00 |
|
$1,237.00 |
$13,607.00 |
$8,190.00 |
|
$2,675.00 |
$29,425.00 |
$27,269.00 |
|
46 |
$421.50 |
$3,258.00 |
$0.00 |
|
$1,237.00 |
$14,844.00 |
$9,187.00 |
|
$2,675.00 |
$32,100.00 |
$31,025.00 |
|
47 |
$421.50 |
$3,679.50 |
$0.00 |
|
$1,237.00 |
$16,081.00 |
$10,221.00 |
|
$2,675.00 |
$34,775.00 |
$34,853.00 |
|
48 |
$421.50 |
$4,101.00 |
$0.00 |
|
$1,237.00 |
$17,318.00 |
$11,296.00 |
|
$2,675.00 |
$37,450.00 |
$39,007.00 |
|
49 |
$421.50 |
$4,522.50 |
$0.00 |
|
$1,237.00 |
$18,555.00 |
$12,417.00 |
|
$2,675.00 |
$40,125.00 |
$43,495.00 |
|
50 |
$421.50 |
$4,944.00 |
$0.00 |
|
$1,237.00 |
$19,792.00 |
$13,587.00 |
|
$2,675.00 |
$42,800.00 |
$48,375.00 |
|
51 |
$421.50 |
$5,365.50 |
$0.00 |
|
$1,237.00 |
$21,029.00 |
$14,809.00 |
|
$2,675.00 |
$45,475.00 |
$53,391.00 |
|
52 |
$421.50 |
$5,787.00 |
$0.00 |
|
$1,237.00 |
$22,266.00 |
$16,080.00 |
|
$2,675.00 |
$48,150.00 |
$58,548.00 |
|
53 |
$421.50 |
$6,208.50 |
$0.00 |
|
$1,237.00 |
$23,503.00 |
$17,398.00 |
|
$2,675.00 |
$50,825.00 |
$64,103.00 |
|
54 |
$421.50 |
$6,630.00 |
$0.00 |
|
$1,237.00 |
$24,740.00 |
$18,761.00 |
|
$2,675.00 |
$53,500.00 |
$69,813.00 |
|
55 |
$941.50 |
$7,571.50 |
$0.00 |
|
$1,237.00 |
$25,977.00 |
$20,163.00 |
|
$2,675.00 |
$56,175.00 |
$75,684.00 |
|
56 |
$941.50 |
$8,513.00 |
$0.00 |
|
$1,237.00 |
$27,214.00 |
$21,599.00 |
|
$2,675.00 |
$58,850.00 |
$81,975.00 |
|
57 |
$941.50 |
$9,454.50 |
$0.00 |
|
$1,237.00 |
$28,451.00 |
$23,065.00 |
|
$2,675.00 |
$61,525.00 |
$88,442.00 |
|
58 |
$941.50 |
$10,396.00 |
$0.00 |
|
$1,237.00 |
$29,688.00 |
$24,559.00 |
|
$2,675.00 |
$64,200.00 |
$95,091.00 |
|
59 |
$941.50 |
$11,337.50 |
$0.00 |
|
$1,237.00 |
$30,925.00 |
$26,079.00 |
|
$2,675.00 |
$66,875.00 |
$101,928.00 |
|
60 |
$941.50 |
$12,279.00 |
$0.00 |
|
$1,237.00 |
$32,162.00 |
$27,568.00 |
|
$2,675.00 |
$69,550.00 |
$109,207.00 |
|
61 |
$941.50 |
$13,220.50 |
$0.00 |
|
$1,237.00 |
$33,399.00 |
$29,044.00 |
|
$2,675.00 |
$72,225.00 |
$116,443.00 |
|
62 |
$941.50 |
$14,162.00 |
$0.00 |
|
$1,237.00 |
$34,636.00 |
$30,479.00 |
|
$2,675.00 |
$74,900.00 |
$124,143.00 |
|
63 |
$941.50 |
$15,103.50 |
$0.00 |
|
$1,237.00 |
$35,873.00 |
$31,852.00 |
|
$2,675.00 |
$77,575.00 |
$132,069.00 |
|
64 |
$941.50 |
$16,045.00 |
$0.00 |
|
$1,237.00 |
$37,110.00 |
$33,149.00 |
|
$2,675.00 |
$80,250.00 |
$140,231.00 |
|
65 |
$2,364.00 |
$18,409.00 |
$0.00 |
|
$1,237.00 |
$38,347.00 |
$34,354.00 |
|
$2,675.00 |
$82,925.00 |
$148,637.00 |
|
66 |
$2,364.00 |
$20,773.00 |
$0.00 |
|
$1,237.00 |
$39,584.00 |
$35,455.00 |
|
$2,675.00 |
$85,600.00 |
$157,295.00 |
|
67 |
$2,364.00 |
$23,137.00 |
$0.00 |
|
$1,237.00 |
$40,821.00 |
$36,437.00 |
|
$2,675.00 |
$88,275.00 |
$166,228.00 |
|
68 |
$2,364.00 |
$25,501.00 |
$0.00 |
|
$1,237.00 |
$42,058.00 |
$37,274.00 |
|
$2,675.00 |
$90,950.00 |
$175,442.00 |
|
69 |
$2,364.00 |
$27,865.00 |
$0.00 |
|
$1,237.00 |
$43,295.00 |
$37,942.00 |
|
$2,675.00 |
$93,625.00 |
$185,188.00 |
|
70 |
$2,364.00 |
$30,229.00 |
$0.00 |
|
$1,237.00 |
$44,532.00 |
$38,356.00 |
|
$2,675.00 |
$96,300.00 |
$194,961.00 |
|
71 |
$2,364.00 |
$32,593.00 |
$0.00 |
|
$1,237.00 |
$45,769.00 |
$38,421.00 |
|
$2,675.00 |
$98,975.00 |
$205,242.00 |
|
72 |
$2,364.00 |
$34,957.00 |
$0.00 |
|
$1,237.00 |
$47,006.00 |
$38,072.00 |
|
$2,675.00 |
$101,650.00 |
$215,547.00 |
|
73 |
$2,364.00 |
$37,321.00 |
$0.00 |
|
$1,237.00 |
$48,243.00 |
$37,241.00 |
|
$2,675.00 |
$104,325.00 |
$226,402.00 |
|
74 |
$2,364.00 |
$39,685.00 |
$0.00 |
|
$1,237.00 |
$49,480.00 |
$35,847.00 |
|
$2,675.00 |
$107,000.00 |
$237,308.00 |
|
75 |
$10,602.00 |
$50,287.00 |
$0.00 |
|
$1,237.00 |
$50,717.00 |
$33,780.00 |
|
$2,675.00 |
$109,675.00 |
$248,515.00 |
|
76 |
$10,602.00 |
$60,889.00 |
$0.00 |
|
$1,237.00 |
$51,954.00 |
$30,909.00 |
|
$2,675.00 |
$112,350.00 |
$260,020.00 |
|
77 |
$10,602.00 |
$71,491.00 |
$0.00 |
|
$1,237.00 |
$53,191.00 |
$27,040.00 |
|
$2,675.00 |
$115,025.00 |
$271,831.00 |
|
78 |
$10,602.00 |
$82,093.00 |
$0.00 |
|
$1,237.00 |
$54,428.00 |
$21,864.00 |
|
$2,675.00 |
$117,700.00 |
$283,703.00 |
|
79 |
$10,602.00 |
$92,695.00 |
$0.00 |
|
$1,237.00 |
$55,665.00 |
$15,011.00 |
|
$2,675.00 |
$120,375.00 |
$295,880.00 |
|
80 |
$10,602.00 |
$103,297.00 |
$0.00 |
|
$1,237.00 |
$56,902.00 |
$6,470.00 |
|
$2,675.00 |
$123,050.00 |
$308,114.00 |
|
81 |
$10,602.00 |
$113,899.00 |
$0.00 |
|
$1,237.00 |
$58,139.00 |
$0.00 |
|
$2,675.00 |
$125,725.00 |
$320,588.00 |
|
82 |
$10,602.00 |
$124,501.00 |
$0.00 |
|
$1,237.00 |
$59,376.00 |
$0.00 |
|
$2,675.00 |
$128,400.00 |
$333,072.00 |
|
83 |
$10,602.00 |
$135,103.00 |
$0.00 |
|
$1,237.00 |
$60,613.00 |
$0.00 |
|
$2,675.00 |
$131,075.00 |
$345,540.00 |
|
84 |
$10,602.00 |
$145,705.00 |
$0.00 |
|
$1,237.00 |
$61,850.00 |
$0.00 |
|
$2,675.00 |
$133,750.00 |
$358,215.00 |
|
85 |
$24,702.50 |
$170,407.50 |
$0.00 |
|
$1,237.00 |
$63,087.00 |
$0.00 |
|
$2,675.00 |
$136,425.00 |
$371,086.00 |
|
86 |
$24,702.50 |
$195,110.00 |
$0.00 |
|
$1,237.00 |
$64,324.00 |
$0.00 |
|
$2,675.00 |
$139,100.00 |
$383,660.00 |
|
87 |
$24,702.50 |
$219,812.50 |
$0.00 |
|
$1,237.00 |
$65,561.00 |
$0.00 |
|
$2,675.00 |
$141,775.00 |
$396,542.00 |
|
88 |
$24,702.50 |
$244,515.00 |
$0.00 |
|
$1,237.00 |
$66,798.00 |
$0.00 |
|
$2,675.00 |
$144,450.00 |
$409,493.00 |
|
89 |
$24,702.50 |
$269,217.50 |
$0.00 |
|
$1,237.00 |
$68,035.00 |
$0.00 |
|
$2,675.00 |
$147,125.00 |
$422,513.00 |
|
90 |
$24,702.50 |
$293,920.00 |
$0.00 |
|
$1,237.00 |
$69,272.00 |
$0.00 |
|
$2,675.00 |
$149,800.00 |
$435,633.00 |
|
91 |
$24,702.50 |
$318,622.50 |
$0.00 |
|
$1,237.00 |
$70,509.00 |
$0.00 |
|
$2,675.00 |
$152,475.00 |
$449,109.00 |
|
92 |
$24,702.50 |
$343,325.00 |
$0.00 |
|
$1,237.00 |
$71,746.00 |
$0.00 |
|
$2,675.00 |
$155,150.00 |
$462,893.00 |
|
93 |
$24,702.50 |
$368,027.50 |
$0.00 |
|
$1,237.00 |
$72,983.00 |
$0.00 |
|
$2,675.00 |
$157,825.00 |
$476,717.00 |
|
94 |
$24,702.50 |
$392,730.00 |
$0.00 |
|
$1,237.00 |
$74,220.00 |
$0.00 |
|
$2,675.00 |
$160,500.00 |
$490,812.00 |
|
95 |
$24,702.50 |
$417,432.50 |
$0.00 |
|
$1,237.00 |
$75,457.00 |
$0.00 |
|
$2,675.00 |
$163,175.00 |
$505,182.00 |
|
Age |
Premium |
Cumulative Premium |
Projected Cash Value |
|
Premium |
Cumulative Premium |
Projected Cash Value |
|
Premium |
Cumulative Premium |
Projected Cash Value |
|
|
Term Life |
|
Universal Life |
|
Whole Life |
Click
here for the Full Illustrations:
Term Life -
Universal Life -
Whole Life
Take
a look at the break-even points on the cumulative premium for
the term vs. permanent. I have highlighted these in
red. Age 75 is the simple break-even point for the term vs.
universal life while age 83 for the term vs. whole
life. Are your clients expected to live longer than
this?
Some
variables not accounted for in the above example are market
conditions and current medical status. The above chart
assumes the client is a "Standard" risk class throughout his
entire life in respect to the Term Life insurance. If he had a change in health at anytime, the term
premiums would likely be higher going forward. Additionally, we have seen term life premiums decrease and
increase over the past decade. The estimated 10-year term
rates shown above may be higher or lower on the 10-year
intervals.
However, in selecting one of the permanent options, Whole Life
or Universal Life, there is a sleeping giant. Look
at the projected cash values! Term life, except in the
case of death, will not provide their children with college
tuition funds, a down payment on a new home or emergency funds
if needed during Life.
Truly
Term Life insurance provides a significant value to consumers on
a Short Term basis. Do not neglect to show your clients
the value of the permanent options available to them with
Universal and Whole Life. The permanent plans have value
upon death AND in life.
Contact the Marketing Department at Financial Markets, Inc. today to
get a quote for your most valued clients.
Written by: AppMan©
|
