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prsmom | Primerica, Smart Loans and Life Insurance? |
Hello:
I've got a few questions here. So, we've been seeing a financial consultant for about 6 years. He's hooked us up with and RESP, life insurance and helped with general planning. Then last fall a good family friend gets involved with Primerica. She came out and did an assessment and gave some suggestions. She told us things like our current guy had us set up with 2 separate life insurance policies, thereby we were being charged 2 separate fees for said insurance. Plus, our insurance goes in 10 year increments and the monthly payment will increase substantially when it renews. Primerica's would not do this.
Then she shows us info on their "Smart Loan", a consolidation loan that will allow us to pay 50% to interest and 50% to principal from day one, not slowly work up to more and more principal like our current mortgage. This sounds good, but...does anybody know any more info on it?
Back the insurance, how do you go about figuring out how much insurance one needs?
Additional Details
I'm a stay at home mom with 4 kids and our current finance guy says my husband and I both need 500 thousand of life insurance. The Primerica assessment says I only need 240 thousand and my husband a little less then 450. Who's right? How do we figure it out?
I guess my other problem is my sense of loyalty to our first guy. If we changed insurance over, I hate the thought of having to call up our guy and say, thanks for 6 years, but we're going with Primerica. |
 |
 
P&M
|
The policy fee is generally $25-$50 a year per policy. Over 12 months, it doesn't really break your bank account, does it?
The advantage of 2 policies is the flexibility of converting 1 policy to a permanent policy for estate planning purposes. Plus many companies offer no policy fee on the 2nd policy if the payment is coming from the same bank account.
As for the Term 10 policy, it all depends on what you needed it for. No need to buy a Term 30 or 100 if its purpose was to cover your short term debts (ie: mortgage, loans, etc etc). If the debt was to be repaid within 10 yrs, then why pay the extra premium for a longer term policy? Again, it all depends on the original purpose for the T10 policy.
As for the face amount of those policies, the death benefit serves to cover debts and also provide income protection to the surviving spouse should one spouse pass away. For example, assuming a 5% investment return, your husband death beneft could provide you with a 34K annual income indexed at 2% for 20 ys.. Would that 34K help replace the income that your husband would have earned had he still been alive?
Whatever you do, make sure you don't cancel the T10 policy until you have been approved for the new replacement policy. You never know how your health has changed since.
You should ask for pricing comparisons with other insurance companies to see if there is cheaper coverage out there.
You should also look at the financial stability of the insurance company itself. For example, Manulife's S&P rating is AAA. AIG Life & Canada Life are AA. Does the other insurance company come close?
Here is a link to calculate how much life insurance coverage you and your husband need: http://www.manulife.ca/canada/ulcalcs.nsf/Ircalc?readform
Consoldation of loans are generally a good thing. Especially if you have high interest loans from credit cards or consumer/store cards.
Maybe have the original Advisor come out and do an assessment on you. Perhaps your needs have changed since the last time you meet up with him/her. Then you can compare the two. Maybe take the assessments to an unbiased 3rd party for their assessment of the assessments. |
|
hungry man
 |
I am always suspect when someone can only find faults with a current insurance and investment plan that is in place. It sounds like you have a 10 year level term policy, which is probably not bad, not knowing your age. ALL TERM insurance goes up in price at some point. Primerica has sold 11 year and 20 year level term policies. The last ones that I have seen have been 20 year policies and then the premium increases substantially. At the end of your current policy, if the price goes up too much then shop around. Most policies show a guaranteed rate in the policy pages and may not be what the company will charge at that time. If you drop your current policy, then the suicide and contestable clause come back into effect. Means that the first two years the insurance company will not pay for suicide and will research in depth any claim. Don't fall for all that baloney about fees, your family friend wants a commission and is trying to confuse you. I have always carried the same amount of insurance on my wife as I carry on myself. She has only worked 2 years in the last 29, but if she is gone, I would have lost my childcare provider, my housekeeper, my children's chauffeur, my children's nurse, and if anything happened to either of us, college is paid for the children. I have never told a client that they had too much insurance, at times I have told them they are paying too much for their insurance, but NEVER that it was too much. I never had a beneficiary tell me "this is too much money, take some back". I have been asked "is this all there is?"
Set down with your current agent and talk to him or her, I am certain it will be beneficial to everyone. |
|
Primerica Financial Rep.
|
The SMART loan is a unique loan that consolidates all your debt into one lower monthly payment with a fix interest rate. The length of the loan is equal to the number of years and months you have left on your current mortgage. This loan is specifically designed to get people out of debt as soon as possible versus keeping them in debt for the life of the loan. Primerica's SMART loan uses a simple interest rate calculation method (which is used in student loans) versus schedule interest (which is used in mortgages). You can see the difference between simple interest and schedule interest here: http://finance1o1.blogspot.com/2007/06/simple-interest-vs-schedule-interest.html
By using the simple interest method, you pay the principal faster, which in turns build your equity, and eventually pay the loan off faster as well. By paying the loan quickly, you will save thousands of dollars on interest.
As for the life insurance, if you know you have more than one life insurance policy, then you are paying more than one policy fee. Every policy has an annual fee, whether its life insurance or auto insurance or any other types of life insurance. By spreading your coverage out into multiple policies, you are paying more money per $1000 coverage. Primerica's life insurance covers husband and wife, and if needed, the kids, in one single life insurance policy. Not only do you pay only one policy fee, you also pay less money per thousand coverage because the rate is base upon the total coverage of husband and wife (along with other factors such as whether you smoke or not, your age, your height and weight, etc).
Anyway, the agent should do a side by side comparison between your current plan and the new proposal. |
|
sporregar
 |
You both need TERM life insurance policy and not whole life. Your husband needs a boatload to take care of burial, you, the kids, kids' college and the mortgage if he died because you don't work and probably wouldn't be able to find a job that would pay as much as he's making. You'd not need as much coverage because he's the primary wage earner and would probably only need for burial and childcare costs.
I'm don't do business with Primerica so I can't tell you if their deals are any good. I did find this site http://www.ripoffreport.com/reports/0/147/ripoff0147643.htm and this http://www.deferred.com/wwwboard/messages/8595.html
You can do more research on the company at the Better Business Bureau and web searching.
As to figuring out how much insurance you need, that's a tricky thing. It depends on how old you are, your lifestyle, how much debt you have, who earns what, what your future expenses would be and other variables.
And don't feel too guilty about leaving your old financial planner. He's supposed to be looking out for your best interests. Frankly, insurance is big business and HUGE commission for the seller. So of course they want to sell you more and more. And if he's steering you wrong in the insurance bit then he might not be doing all in your best interests in the rest of it either.
Check out this site too http://www.100insurers.com/company_ratings.htm
Good luck. |
|
Richie Rich
|
For life insurance, determine how much debt you have, funeral expenses, and how much per month you would need to live on for a few years.
Just because you may only NEED 240/450 doesn't mean you should stick to that. Go with what you are comfortable with and can safly afford. From experience of others in my office, the amount you need is never enough.
Primerica policies can go all the way out to 35 years level term and guaranteed renewable. So keep that in mind as well.
You are paying 2 separate fees for 2 policies though.
And although commissions are high on insurance, they are much higher on cash value policies than they are on term.
For the $.M.A.R.T. Loan, that is not entirely accurate. It is a simple interest fixed rate mortgage. The real benefit with it comes with the Equity Builder option. Bi-weekly auto draft (free of charge) that also causes a .25% rate reduction on the calculation. Basically, if you qualify for a 7.00% loan, we bill at 7.00% but charge you at 6.75%. It is meant to help pay down the loan even faster.
Look at all the information, and if you need to, have your current agent and your family friend (preferably with one of his uplines with him) sit down with you at the same time and let them go over the details with you. Have them put all the facts on the table, no sales pitches, and choose whom you believe is giving you a better product for your family. |
|
tweazee65
 |
Read your current policy over and over again. If you don’t understand it (and they are designed to be EXTREMELY confusing) ask your “CURRENT policy agent” to explain it until you do. Make them give you examples for EACH paragraph in the policy - show you how it works (for you or against you)?
What hidden fees are in your LIFE policy? {i.e. Riders; yearly/monthly premium expense; monthly cost; etc. }
How long does it take your current insurance company to payout the D.B. (death benefit) policy? Is it immediately or does it state months/years? If it takes months/years, are you guaranteed an accrued interest rate? Are you given the interest money?
Do you have option A(1) or option B(2) on your policy?
Option A: The d.b. is paid, but the c.v (cash value) stays with insurance company when the insured dies.
Option B: Both the d.b. & c.v are paid out, but premiums are higher.
What are the surrendering fees if you decide to switch companies?
Can your Life be converted to Term?
When will the coi (cost of actual insurance) = p.p. (premium payment) -- this will cause c.v to stop accruing.
When will coi become greater than p.p. -- this start eating away (reduces) the c.v. balance.
When will c.v = zero, and you start getting bills in the mail saying you owe additional payments to keep the policy in effect.
Make sure the beneficiary takes the D.B. in a LUMP SUM payment. Only the LUMP SUM option is free of taxes- all other disbursements will be taxed by the government.
Some "insurance companies" may push the other disbursements, because they can collect interest while they hold/invest the D.B for beneficiary, and they get to keep the interest.
=== === === === === === === === === === === ===
Example of policy with D.B. = $100,000
Current age = 35
Yearly Payment = $552
Monthly payment = $46
"Coi Waiver" Rider
Prem exp = 5% of prem payment.
Monthly exp = $5 (most people don’t make yearly paymts up front)
Policy Fees:
Coi = Rate x D.B (rate is based on age in D.B table)
Rider = D.B x waiver of rate (also base on age, but uses a waiver table)
Prem Exp = 5% x 46
(paymt-coi-rider cost-mo exp-prem exp) = c.v
(46-18.10-0.72-2.30-5) = 38.70
If coi continues to raise each year, but p.p. stay the same, the c.v quits accruing by the time this person hits 42.
By the time they hit 48, the c.v = will be zero, and all future payments will increase each time.
If at ANY time during the policy coverage, the person becomes disabled and does implement the Coi Waiver, the c.v immediately stops accruing -- the ins company pays your coi only - they do not contribute to c.v.
Hope this helps. |
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