Younger clients are not thinking about inflation
and buying enough life insurance.
I want to talk about Inflation for a minute. Then I will tell you
how it can help you increase your Life Insurance numbers.
What is Inflation? It has to do with the value of a dollar and how
it decreases in value. Let me tell you this story to help you understand. 50 years ago, you could buy a coca cola
for a nickel or less. Every couple of years, the price of a coke would go up. It just seems like yesterday that you
could buy a can of coke for 50 cent. I bought a coke from a vending machine for $1 today in a can. Why does the
price of coke keep going up? It is inflation and the value of a dollar.
Let me tell you one more story. I was talking with a client about
life insurance the other day. She was 74 years old. She already had life insurance. But the problem was she didn't'
have enough life insurance. When she bought the insurance it was more then plenty. She had bought her policy about
40 something years ago. She bought a $15,000 policy. When she bought it she could have bought a new home for under
$15,000. A new car was under $5,000 at the time she bought this policy. Before you start blaming her agent for not
selling her enough life insurance, I want to stop and ask you are you doing the same thing he did? Are you selling
your clients enough insurance? The agent truly believed at the time he sold this to her, that this would be enough
coverage for her. Let me give you an example in today's time. Let's say you have a 30 year old male that wants to
buy $50,000 or $100,000 worth of coverage. The average agent would not stop for a second to think about inflation
on this young man. I bet he has another 50 years of life left in him. In 50 years will even $100,000 be enough?
Will $100,000 be like $50,000 in 50 years? Just 10 years ago $100,000 would buy you a mansion of a house here in
Georgia. But today, a $100,000 house is a shack. We are losing the value of the dollar every day that goes
Now I'm not sure what the % is that you calculate to figure out
what you should add to a life insurance premium to count for inflation. I think someone told me 4% a year or
something like that. The younger the client, the more of problem inflation will become. Some would even say that
you should add 25% coverage to whatever you think you need if the client is younger then 50 years old. I just don't
want to see any client, get old one day and all of the sudden the protection that they think they have, is not
Why not just at least bring this up to your younger clients when
they are purchasing life insurance from you. It may increase your sale by 25% or whatever you determine the
inflation amount will be.
Besides talking about inflation, I'm still seeing clients'
everyday that has not bought enough life insurance and think that they have enough insurance. Their agents didn't
take the time to do some kind of a planner with them to determine how much they need. But don't allow me to get off
the subject of inflation and how we need to talk to our younger clients about it. Inflation and not buying enough
Let's us Mark Rosenthal for an example. I don't want to buy
decreasing life insurance. I want my dollar amount to stay the same, for ever. I don't care if the kids leave home
one day and the house is paid off. I will never leave Leslie (my wife) too much money. She will never say that I
left her too much. I understand how the deal works. On my U.L. policy, for $100,000 , at the most I will pay the
company $45,000 if I live to be 100 years old. I am more then doubling my investment that I'm leaving to someone
that I love. Side note, I have an age 100 guarantee on it. So the premium can never change. Back to my example on
me. I am buying the value of x which is $100,000 that I wish to leave my wife upon my death. I already have other
policies for the house and kids. But this policy is just for her. Let's say that I don't die for 50 more years.
That $100,000 will be worth about $25,000 in value.
Another example. I grandfather left me $1000 in life insurance. It meant the world to me. But...When he bought it,
it had the value of $10,000 to him. When he bought it $1,000 had more value then it does today. Over 20 years ago,
$1,000 could do great things. His $1,000 that he left each grandchild, if he had died back then, would have been
equal to about $10,000 today.
I think I'm leaving Leslie (my wife) $100,000. The problem is I'm young and still have 50 years left in me. So I
hope. In 50 years, it will be worth $25,000 in value.
$100,000 = x . Your value of x should never become less then x. It does not matter if you have less bills or don't
need the money as much.
Also, inflation is about 4% a year. It does not take long for this to be a factor.
It is just like buying a decreasing term policy. Each year you loss 4% in value or protection. But you think you
are getting a level value policy.
It reminds me of my homeowners insurance. Each year, they tell me that it cost more to rebuild my home if something
happens to it. So they keep increasing my protection every year. The agent told me that cost of wood has more then
doubled and I didn't have enough protectiong and he had to update my policy...$$$$$$$
In what you are saying, why not just buy a decreasing term policy or a whole life or ul that has a decreasing face
amount? If you don't care about losing value of your protection.
Also look at it in another way. What if instead of life insurance, the $100,000 is in a saving account. 40 years
from now you go to your saving account and there is only $40,000. The bank manager tells you, that you don't need
$100,000 anymore, because you have less bills. Would you be mad?