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Although semi-retired, Harold Roberts sells more than 120 life insurance policies a year — mostly permanent insurance. Here’s his secret. |
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Roberts gets a chuckle from reading a grocery store ad from 1979. Three boxes of tissue were 89 cents, a 12-ounce package of bacon 78 cents, and a half gallon of fabric softener 59 cents. He uses old newspapers to show clients the dramatic impact of inflation on retirement income.
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Harold Roberts, CLU, recalls hearing a statistic a few years back that the average life-appointed agent sells about 50 policies a year. "That’s about one policy a week," he mused. "It makes me wonder, what are they doing with the other 39 hours of the week?"
Roberts, owner of Tacoma, Wash.-based Roberts & Associates, helps his clients buy more than a 120 life insurance policies a year. Back when his business was in full swing, before shifting into lower gear for what he considers "semi-retirement," he sold more than 400 life policies a year — that’s in addition to auto, homeowners, investments and health insurance.
It’s not that he thinks other agents are lazy. It’s just that he wants every agent to share his deeply held, passionate belief that families need life insurance — and not just when they’re young. He knows, without a doubt in his mind, if given the chance to sit down and talk to a client about the benefits of owning permanent life insurance he will almost always make the sale. In fact, his close ratio is well over 90 percent.
Invest the Rest? Yeah, Right
"There are two kinds of people I want to talk to about life insurance," said Roberts, "those who will die too soon and those who will live too long. We’re all going to do one or the other, and we can solve both problems with the same dollars."
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To make his point, he pulls out a community newspaper and points to one of those question-and-answer ads featuring various community professionals — doctors, lawyers, accountants. The question to the insurance agent reads, "What type of life insurance should I buy?" The agent replies, "My answer is always the same: term insurance."
Roberts agrees that term insurance is appropriate for some people, but for most, he strongly believes permanent insurance is almost always a better choice.
For one thing, people’s financial obligations rarely end when their term insurance ends. And, as a client ages, even minor health problems like weight gain, diabetes or seeking treatment for depression can make term life insurance unaffordable or inaccessible.
Well, you say, isn’t that why so many financial advisors recommend "buying term and investing the rest"? True, but by the time their term insurance expires investors need to have enough money saved to cover future expenses. Problem is, Roberts says, few people have the discipline to "invest the rest." Even if they did, they probably wouldn’t be able to save enough.
Term vs. Permanent: The Numbers
Roberts is writing a book: "When You Die or If You Die?" In it, he plans to lay out his business-winning concept, which we’ve outlined here.
In the charts below, we see that annual term life insurance premiums for a 35-year-old male in good health (preferred nonsmoker) start out at $280 versus $1,500 for universal life. When the client in this hypothetical scenario reaches 55, however, he still has a mortgage and children in college. He opts to continue his term life insurance, but in year 21 his annual premium climbs to $2,837.50.
At the end of 30 years this client would have paid out premiums of $50,928 for term insurance and $45,000 for universal life. Over that time span, if he had universal life he would have saved $5,928 in premiums versus term and accumulated $61,549 in cash value (versus zero cash value for term).
Let’s say he opted for term and was a disciplined saver. If he invested the annual premium savings of $1,220 in a vehicle that paid a similar rate to the universal life policy in this scenario (3.65 percent), after 20 years he would have saved $31,7111 (the cash value for universal life would be $34,088). After year 20, however, his term premiums would begin exceeding his universal life premiums and he would either drop coverage or start cannibalizing his savings.
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Chart A (Years 1-20):
$250,000 of Life Insurance Coverage for a 35-Year-Old Male |
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Annual Premium |
Total premiums paid in after 20 years |
Cost of insurance after 20 years |
Cash value after 20 years |
20-Year Term
(Preferred Nonsmoker) |
$280 |
$5,600 |
$5,600 |
$0 |
Universal Life
(Standard Nonsmoker) |
$1,500 |
$30,000 |
-$4,088 |
$34,088 |
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Annual Term Savings: |
Term Savings after 20 years: |
Term vs. UL: |
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$1,220
(leftover to invest) |
$24,400**
(leftover to invest) |
In the first 20 years, the actual cost of insurance is $1,512 more for term vs. UL. The UL cash value, if surrendered, is $34, 088 vs. $31,711 if the client had term and "invested the rest" at 3.65%.** |
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Chart B (Years 21-30):
$250,000 of Life Insurance Coverage for Male Client Now Age 55 |
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Annual Premium |
Total premiums paid in after 30 years |
Cost of insurance after 30 years |
Cash value after 30 years |
| Term in Year 21 |
$2,837.50 |
$50,928 |
$50,928 |
$0 |
| Term in Year 25 |
$4,125.00 |
| Term in Year 30 |
$6,822.50 |
| Universal Life* |
$1,500 |
$45,000 |
-$16,549 |
$61,549 |
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Annual Term Savings: |
Term Savings after 30 years: |
Term vs. UL after 30 years
(client now age 65): |
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term premiums now exceed UL |
-$5,928
(term premiums now exceed UL) |
With $5,928 in premium savings vs. term, and $61,549 in cash value, after 30 years the UL client is $67,477 ahead vs. term insurance. |
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*Accelerated Universal Life numbers are based on the current, non-guaranteed interest rate of 3.65% (as of Oct. 24, 2005).
**That $24,400 savings would grow to $31,711 if invested. This figure is based on $1,220 annual deposits over a 20-year period, compounded monthly at a rate of return of 3.65% and taxed at a marginal rate of 28 percent.
This is a hypothetical scenario. Rates quoted are for Symetra Life’s 20-Year Level Term and Accelerated Universal Life as of Oct. 24, 2005. |
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When It’s Too Late
Roberts acknowledges that term life insurance plays an important role. "Will some of those term life policyholders die? Of course they will, but the fact is less than 1 percent of all term life policies pay a claim,"2 he said. "That’s why the mortality tables are so important and that’s why term life insurance initially has a lower cost."
The important question for those who live beyond the 20-year term is what happens next? Many times, the 35-year-old will become uninsurable at 55.
"I’ve gotten these calls more times than I’d like to think about," Roberts said. "A client’s health declines and they can’t go out and buy a new term policy at any price. So what’s their option? Their option is to keep their term policy, and we see what happens to the premium in the 21st year and beyond."
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| Just last week he received a call from a woman who wanted to increase her husband’s life insurance coverage: "Immediately a red flag goes up. When I ask why, she tells me her husband is going in for colon cancer surgery on Tuesday and they’re not sure they have enough coverage. I had to tell her the chances of that happening are absolutely zero. Probably not now, not ever, will they be able to increase their coverage. It would be just like if you suddenly saw your house is on fire and you call your agent and say, ‘Get me some insurance quick!’
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"If you do it my way, you can say, ‘Okay, I’ve protected you with life insurance while I’m getting ready to retire. Now I’ll continue to protect you with those very same dollars.’"
Looking back to the scenario above, if the policyholder lives into his golden years he still has $250,000 worth of life insurance he can now use to cover her retirement expenses after he dies. Even if he continues paying $125 per month for it, that’s going to be far less than what he’d have to give up out of his pension or other income sources if he opts to reduce the payout to ensure that those payments continue to his wife after he dies. If she dies first, he can take the life policy’s cash value or leave the death benefit in a trust for his grandchildren.
Roberts recalled a time when he was training his stepson to take over the family business. "One day we were out on an appointment and I was going to show him what I know. So, I asked the husband if he’d ever said something like this to his wife, ‘Darling, I love you and I promise to take care of you as long as I live.’ When we got back to the car I asked Ted what he thought and he said, ‘Well, I think I would have said, ‘Darling, I promise to take care of you as long as you live.’ He was so right."
Roberts, who is 73, has a wife who is five years younger. He also knows that statistically women live seven years longer than men — potentially making his wife a widow for 12 years. He wants to make sure she’s taken care of.
"When a spouse dies, the couple’s problems are shifted to the person who’s left behind," he said. "You need to make sure that person is taken care of as long as they live. That’s what I told my wife and that’s why I carry over a million dollars of life insurance. Can we get by without it? Probably. We have a nice home, we’ve got some investments, and so on. Do I want to run that risk? Absolutely not."
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FOR AGENT USE ONLY
Other Life Insurance articles of interest:
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1 MSN Money Savings Calculator, based on annual deposits of $1,220 over a 20-year period, compounded monthly at a rate of return of 3.65% and taxed at a marginal rate of 28 percent.
2 Financial Insights, "Cash Value Insurance," Peachtree Planning Corp., p. 4, 2002. This article notes that a survey from Life Insurance Management and Research Associates found that less than 1 percent of all term life insurance policies remained in force for 20 years. Some were converted to other coverages, while others were dropped. Additionally, research from Joseph Belth, Professor Emeritus of Insurance at the Kelley School of Business, Indiana University, found that less than 1 percent of all term life insurance policies paid a claim.
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