1. Life in the Military PRESENTED BY:
Joshua Delgado, External Sales Advisor
February 6, 2018
Welcome everybody. For those new faces in the room I am Joshua Delgado, and I am an External Sales Advisor at CompEdge Financial and here with me today we have Mark Ganter who is one of our External Sales Advisors as well. CompEdge is one of your primary resources when it comes to Life Insurance, Annuities & Asset-Based Long Term Care Insurance.
Today we are here to talk about “Life” in the Military. Now don’t worry…as someone who did not serve in the armed forces I am not here today to speak to the trials & tribulations of a military career and there will be no PT Test as part of today’s training.
What we are going to talk about however are the sales opportunities that exist in which life insurance can play a significant role in protecting one throughout & beyond their military career.
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2. TODAY’S AGENDA. THE MILITARY OPPORTUNITY
What is the Opportunity with Young Active Duty?
Who is your Competition?
GETTING STARTED WITH YOUNG ACTIVE DUTY
Cash Management Visual to support the Military Planning Initiative.
Risk Management Visual to support the Commitment.
THE ROLE OF OPAIs THROUGHOUT A MILITARY CAREER
Revisiting the Visual
OPAI Conversation Best Practices
OPAI Comparison Case Study
LIFE INSURANCE & MILITARY RETIREMENT
Military Retirement Case Study
How purchasing WL along the way helps
Specifically we will cover the following 4 topics:
THE MILITARY OPPORTUNITY
What is the Opportunity when working with Young Active Duty Service Members?
Who is your Competition?
GETTING STARTED WITH YOUNG ACTIVE DUTY
Cash Management Visual to support the Military Planning Initiative (MPI)
Risk Management Visual to support Commitment
THE ROLE OF OPAIs THROUGHOUT A MILITARY CAREER
Revisiting the Visual
OPAI Conversations - Advisor Panel
OPAI Comparison Case Study
LIFE INSURANCE & MILITARY RETIREMENT
Military Retirement Case Study
How purchasing WL along the way helps
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3. THE MILITARY OPPORTUNITY
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4. THE MILITARY OPPORTUNITY.
Each Year on Average 60,000 E-5s & O-1s enter into the Military.
1,500 of these individuals became First Command Clients in 2016.
Every year the attrition from the military is even greater
The best place to start our presentation today is to look at the opportunity that exists to help young active duty members right from the ground floor as they begin their careers. Each year on average ~60,000 E-5s & O-1s enter into the military…a staggering number.
In 2016, 1,500 of these individuals became First Command clients. This means that while you are doing an incredible job of serving those young active duty members you come across, there is still a large “chunk of the pie” if you will that needs to hear from you!
In addition, every year more than 60,000 leave the military! With the new Blended Retirement System leading to even more choices to be made for those getting out (in addition to the choices that were already in place) it is more important than ever that these folks have a plan. The key word there is PLAN which can only be truly accomplished with a planning firm such as First Command. This leads me to a question…which is if only 1,500 of these folks out of 60,000 became First Command clients last year then what are the other 58,500 doing and who are the competitors that many of these service members may be turning to?
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5. Your “Competitors”.
The reality is that many of these folks likely have no plan at all and many have likely never taken financial advice from anyone off base. For those that have, who are the likely companies that these individuals are to come across?
Show the 3 logos on the slide.
All 3 of these companies are highly rated, highly respected companies that do a lot of good when it comes to the military. All 3 offer clients banking options and more importantly to the topic on hand today, all 3 offer varying forms of life insurance to their members as well. But do these companies offer the value proposition that you as a First Command Advisor can bring to the table…one on one consultation from a financial planner…or are these companies even really competitors at all?
To answer these questions, let’s take a deeper look at the company on this slide that is almost synonymous with the military…USAA.
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6. WHAT DOES USAA HAVE TO OFFER?
USAA 8 Money Moves to Make…
Build a Budget
Save for Emergencies
Sign Up for TSP
Guard your Credit
Protect your Stuff
Use Pay Increases to your Advantage
Read up on SCRA (Service Members Civil Relief Act)
VISIT A FINANCIAL COUNSELOR
“Every installation has personal financial managers and classes to help.”
In fact the best place to start when trying to find what USAA is offering to these E-5 & O-1s is to take a look at their ROTC launch (no login required). Here USAA promotes that those starting their military careers must begin their journey to financial independence and they can do so all in one place through USAA. With USAA they can handle their banking needs, protect their stuff (property/renter’s/car insurance), built their credit (through a USAA Credit Card), and start their career off on the right foot through a USAA Starter Loan of up to $25k. There is no mention of life insurance on the home page or on any of the 4 links mentioned.
In addition to these links, USAA provides an article entitled, “8 Money Moves to Make in Your First Few Years of Military Service”. The first 7 moves are:
Build a Budget…solid advice and something any planner should do (see FLI)
Save for Emergencies…also very important and again must be accounted for as part of a plan (think )
Sign up for TSP…get those matching “free” dollars working for you with more emphasis put on saving than ever before under the new BRS
Guard your Credit
Protect Your Stuff
Use Pay Increases to Your Advantage by putting at least half of those pay increasing towards savings…good advice as you build your emergency savings (think again)
Read on SCRA to help alleviate issues such as debt & mortgage payments, breaking leases when PCSing, etc…so gain…great advice
These 7 steps are all important and valuable for all active duty service members to hear. BUT, it is the 8th point that is particularly important in that they recommend Visiting a Financial Counselor. Now one would think this means talking to a USAA representative but the key word here is VISIT and USAA has no retail offices. Therefore they have no true in person planners who can help those starting their military career accomplish all 7 steps listed above while also helping them tackle both their investment and insurance needs. More importantly by not having YOU USAA cannot offer the ability to adapt and make changes to one’s plans over time as life changes. A true plan is only accurate the minute you hit print. Life is always changing and having someone like you by their side is a value proposition USAA simply cannot offer.
Because of this fact, they instead recommend that these individuals speak to a personal financial manager on their installation and attend classes to help. Why not meet with you? Long story short, USAA, AAFMAA & Navy Mutual (as well as any other company you may run into that focuses on the military) all offer valuable products and programs but none of them offer the most valuable commodity when it comes to securing their financial futures….YOU! Never forget that!
Now then, while USAA does not promote life insurance on their ROTC landing page (or subsequent pages), rest assured (as I am sure all of you know) they do offer life insurance in many forms (as do Navy Mutual and AAFMAA as well) and they have the sales to prove it.
Despite not being something they openly promote USAA still is a predominant name when it comes to the Military Market! Therefore let’s take a deeper dive into what USAA has to offer their clients on this front…
Source:
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7. WHAT DOES USAA HAVE TO OFFER?
First Command Premiums
$11.00
$11.00
$42.34
$85.30
When you go to the life insurance page on USAA’s website you will see a nice summary of their offerings, who those offerings are appropriate for according to USAAA and a sample monthly premium for each. On the far left they list level term and military term which are priced the same. The difference is that Military Term offers a few additional benefits specific to the military (Military Dismemberment & Military Future Insurability Riders).
Back to the point though, according to USAA Level Term is for “most people” and quite frankly that may be true of anyone who has a TEMPORARY need.
Moving right, we next stumble upon Universal Life. According to USAA this is appropriate for “some people”. The pricing is quite a bit more than what you would expect to pay for term but you get permanent insurance. The key thing to recognize here is that permanent does not mean Guaranteed. USAA’s UL is not a guaranteed policy meaning many times these policies won’t last unless current ASSUMPTIONS hold true over the course of time. This brings risk into risk management that is unnecessary and overpriced at that!
Lastly we come to their Whole Life (known as Simplified Whole Life). USAA claims this is only “For a few people”. There is no explanation to what this means but needless to say if you call a USAA Rep today chances are they will be super friendly & easy to work with BUT will likely promote Term without even a mention of Whole Life. Using generalities like we see here coupled with the likely response from an over the phone agent sure sounds a lot like our old friend Dave Ramsey doesn’t it?
Now despite their insurance philosophy, their pricing on their products is not too bad! Many of the carriers you can offer as a First Command Advisor off products that come in at a lower premium for term coverage (but riders must be accounted for), offer significantly lower premiums on the UL front (and are guaranteed) but this is not necessarily true when it comes to WL premiums as USAA’s pricing is competitive as seen here. On younger military prospects/clients we find that the WL pricing through both Liberty National & Transamerica Premier will beat the pricing offered by USAA by a decent margin. USAA does however become much more competitive at 40+ and in some instances may offer a better rate than what you have to offer.
The key to remember here though is that USAA offers 5 Non-Tobacco rate classes and typically quotes Preferred Ultra which is their best rate class. At 22 this may be a realistic rate class but the Whole Life you offer will compete. At 40+ Preferred Ultra may not be realistic so one should look into fill out a 624-e for clients to set a realistic expectation. Lastly, USAA has the ability on their Whole Life to show a 20 Pay or Pay to 65…something the that Liberty and Transamerica are not able to do.
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8. USAA SIMPLIFIED WHOLE LIFE.
LIFE EVENT RIDER DETAILS
$100k Available
25,28,32,36,40 & 45
Marriage, Stork & Separation
from Service Options available
This leads to another question that I hear quite often though which is, “If they can show a short pay then how do I compete? Both of our carriers don’t allow for me to show the policy being paid-up early”. This is a true statement in that the guaranteed values calculators do not allow us to show premiums stopping at an early age. HOWEVER, we do have the RPU option so now we are going to look at a quick case study that shows you how you can compare to the USAA Simplified WL when you come across it (please also note we can do these comparisons for any carrier).
Here we have an actual policy illustration from USAA on a 28 year old Male. The Policy is for $100k in coverage with Waiver of Premium Rider included and is a Pay to 65 policy. This coverage comes in at a cost of $91.22/month but is completely paid-up at Age 65. As a side note, USAA does offer a Life Event (OPAI Rider) but that was not quoted here. This is common (that it is not quoted) despite the value it brings (more on OPAI in a bit).
In addition, the Life Events Rider, while a solid rider, is not as competitive as the rider you have to offer. It offers options to purchase additional insurance through guaranteed insurability but the options are more spread out. They start with 3 year intervals like the options you can offer BUT increase to 4 year intervals and eventually 5 years. They do offer marriage, stork and separation from service however but Liberty offers the latter and both carriers offer 3 year intervals and contingent options for $100k!
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9. USAA Simplified wl vs your non-par wl.
We do so by solving for what Death Benefit we could buy today with your carriers that would allow for us to have an RPU value of $100k at Age 65. If you do not wish to do this plug and chug yourself that is fine! That is what we at CompEdge are here to help with! Let us work your comparisons for you!
In this instance, in order to have an RPU Value of $100k at Age 65 on our 28 year old male, we would need to buy $119,048 in coverage today. This gives our prospect/client almost 20% more coverage until Age 65….the same coverage of $100k at 65+(if one chooses to RPU at that time)…and does so for $9 less per month! What a deal…but wait…THERE’S MORE!
In addition to the benefits just mentioned, also note that we have added a $100k OPAI Rider as well which will provide your client with the option to purchase additional insurance without proof of insurability (in the amount of $100k) at Ages 31, 34, 37 & 40….contingent options (if available) at 43, 46 & 49 as well as marriage and stork options too…all for $9 less per month than what USAA has to offer.
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10. USAA Simplified wl vs your non-par wl.
So what if we wanted to match premiums? This slide shows doing exactly that and by doing so we get all the benefits mentioned on the last page but now our Death Benefit for the next 37 years comes in at $133,211 or 33% more coverage!
The reason for this comparison, and breakdown of what USAA has to offer, is that when it comes to competition for those 60k new servicemen and women each year you really have no competition. Your products stand up to any other offerings, you have better support through planning, product management and your business partners and most importantly your clients get YOU.
So with that being said, we now want to turn our attention to the different life insurance opportunities that exist throughout one’s military career. Through the use of visuals, case studies and even an advisor panel, we hope this information is valuable to you in helping you identify these opportunities when they present themselves! So let’s begin!
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11. Getting started
And where else to begin than at the beginning of one’s military career. Now the reality is, we here at CompEdge in no way want to reinvent the wheel. When it comes to meeting with young servicemen and women the Client Engagement Process (CEP) currently in place at First Command works! From the PIE/Seminar to the FLI and beyond the training you have received from Field Force Training, your VPDTs, DAs and peers over the years are tried and true processes that we dare not try to recreate. Instead, what we would like to do now is show you a few visuals that we believe only help to reinforce the CEP process already in place!
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12. The “Pay yourself first” Plan.
ADVISOR: In summary, common strategies for those striving for financial success is that they:
• Pay themselves first,
• Live on less than they earn, and
• Avoid high interest debt.
Are you committed to living off less than you earn?
Ed & Geri: Yes, we are.
ADVISOR: Are you committed to saving and investing for a more secure tomorrow?
Ed & Geri: Yes, we are!
ADVISOR: Great. Please mark your answers here.
We will start with a portion of the FLI that speaks to Cash Management, and more specifically, to paying yourselves (meaning the client) first! Part of any good plan is to establish a budget that works and make sure you take care of your immediate needs and future needs before turning to wants. There must be a commitment there and what better way to get a young military member not used to living on a budget to commit than through the establishment of a First Command bank account (as part of the MPI which includes a life insurance and investment purchase).
That being said, for individuals who likely would rather buy a car or live it up early in their military career, it can be hard to get buy off on the investment and insurance commitments under The best way to accomplish this though is to have those $s be “out of site and out of mind” immediately upon being paid. This creates discipline desperately needed at the early stages of one’s career.
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13. The “Pay yourself first” Plan
Budget Items
Budget Amount
First Command Bank Account
Mortgage/Rent
$900
Utilities
$200
Food
$400
Gas
$150
Car
$300
Entertainment
$100
Gifts
$50
Travel
Clothes
10% Investment
5% Insurance
5% Savings
Total
$3,050
$1,000
Investment Company
Transfer via Government Allotment
or Bank Draft from existing
Bank Account
Insurance Company
And the best way to accomplish this, again, is through a First Command Bank Account. The visual we have here is likely one many of you already use. The idea is to simply list out a client’s monthly budget that you have established, pin point those $s in the budget that go towards, “paying your client first” and set those $s up to be sent to an FC Bank Account via allotment or bank draft at each pay check. From there we can set up drafts from the FC Bank Account to go to the insurance and investment companies and be on our way. The client wins by starting a disciplined savings plan and you get an additional $450 under the MPI! A true win-win!
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14. Coverage by following 5-5-10.
ADVISOR: Ok, thank you for that. Previously, we discussed a formula for allocating your income toward your financial plan.
Notionally using our model, we would be allocating: $450 to Risk Management, $450 to Cash Management, and $900 to Wealth Management. If the full 20% of your gross income was available would you have any hesitation about distributing your monthly dollars according to ?
Ed & Geri: No, that sounds good.
This leads us into our next visual which helps support the long term affects of committing to the when it comes to your life insurance budget. Most clients when taken through the FLI will see value in committing to the but putting aside this amount (20% one’s income) can be daunting to young folks (hence the need for the FC Bank account just described). To help assist with showing the positive affects of committing to such a plan, we have borrowed and tweaked a visual provided to FFT from DA Carlos Garza.
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15. Coverage by following 5-5-10.22
Rank
O-1
Insurance Budget (5%)
$200
WL Coverage
$375,000
WL Gtd. CV $0
WL RPU 25
O over 3
$286
$475,000 $0 28
O over 6
$347
$575,000
$5,104
$38,250 31
O over 8
$361
$621,502
$13,744
$91,875 34
O over 12
$438
$710,511
$25,981
$154,694 37
O over 14
$449
$718,795
$41,259
$218,618 40
O over 18
$514
$774,464
$60,500
$285,016 43
Retired O-5 over 20
$514
$774,464
$82,579
$346,447
The visual (seen here) is based on a prospect/client who is an O-1 just beginning their military career. If this client/prospect were to commit to the plan to purchase Whole Life to supplement SGLI then they would not only meet their ongoing insurance needs as they move through the ranks but would also put themselves in a very favorable position at their military retirement. The visual you may notice looks just like the graph you will find in your Liberty National & Transamerica Premier Guaranteed Values Calculators that show the Death Benefit, Guaranteed Cash Values & RPU amounts (in addition to other benefits/values).
To assign some numbers to this visual, we start by showing our O-1 with a $4k monthly budget when all allowances are factored in. Under the this means committing $200 per month to their life insurance plan. Again this can be daunting and many service members may choose to simply rely upon their SGLI but we must remind them of the pitfalls or relying on a group plan that is temporary in nature (see insurance 101).
If we were to use this $200 however to buy WL then we could get $375k in coverage today (with Waiver of Premium) to help cover their permanent long term needs. The idea from there is that we add additional coverage at regular intervals to meet ongoing needs while staying at 5% of our prospect/client’s budget. The client may be left questioning why so much WL today (especially if not married) but it is important to show them the impact that this will have down the road in addition to meeting their income replacement needs today.
If our prospects/clients commit to this idea and add additional $s along the way then at Age 43 they are left with $774,464 in Guaranteed, Permanent WL coverage with Guaranteed Cash Values of $82,579 & an RPU amount of $346,447! This means that when SGLI goes away we already have a solid base of permanent, commercial protection (bought at a younger more advantageous age) all while meeting our needs along the way as our client gets married, buys a house, has kids etc! This also will play a significant role in military retirement decisions which we will explore later.
If we look even further down the road then by Age 65 (designated full retirement age for many) we have $774,464 in coverage BUT our Cash Values have grown to $327,987 and we now have an RPU amount of $643,680.
Now when you look at this visual/these numbers and think about the additional purchases of Whole Life along the way what comes to mind? More specifically, how can we go about setting up a program that allows for such increase throughout one’s military career?
OPAIs! In fact, what I hadn’t mentioned until now is that our initial base policy of $375k not only included the Waiver of Premium Rider but included $100k OPAI Rider as well! As you can see, the years we added additional coverage were at Age 25, 28, 31, 34, 37 & the same years in which options under our OPAI Rider would be available.
Therefore let’s now turn our attention to the OPAI Rider and how it allows us to purchase additional insurance at regular intervals without having to worry about insurability. From there we will speak to OPAI Conversation Best Practices (based on conversations with advisors who have found success in clients taking OPAIs) and then end we will end this section with an OPAI Comparison Case Study.
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16. OPAIs throughout A military career
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17. Coverage by following 5-5-10.22
Rank
O-1
Insurance Budget (5%)
$200
WL Coverage
$375,000
($100,000 OPAI & WP Riders)
WL Gtd. CV $0
WL RPU 25
O over 3
$286
$475,000
($100k OPAI) $0 28
O over 6
$347
$575,000
($100k OPAI)
$5,104
$38,250 31
O over 8
$361
$621,502($46,502 OPAI)
$13,744
$91,875 34
O over 12
$438
$710,511
($89,009 OPAI)
$25,981
$154,694 37
O over 14
$449
$718,795
($8,284 OPAI)
$41,259
$218,618 40
O over 18
$514
$774,464
($55,559 OPAI)
$60,500
$285,016 43
Retired O-5 over 20
$514
$774,464
$82,579
$346,447
$258
$324
Let’s start by reviewing our visual again but this time highlight the use of OPAI options at Ages 25, 28, 31, 34, 37 & 40 to meet ongoing, increasing needs throughout our prospect/client’s military career.
Ads we go through the option dates the first thing you will notice is that at Ages 25 & 28 we are able to take the full $100k OPAI while remaining within our 5% budget. However, when we get to the Age 31 option we are only able to take $48,502 out under the rider while staying on budget. Ideally we would take the full amount but the good news here is that if this were a Trans Premier option then taking less than the full option would still count as an option taken in order to qualify for future contingent options! It does not have to be all or none. Keep those contingent options alive for life’s “what-ifs”!
Now if we fast forward to military retirement our client would have $774,464 in coverage with $82,580 in Cash Values & an RPU amount among all policies of $346,451. This is also without considering additional OPAI options that could be taken for Marriage or the Birth of a Child. It also does not factor in inflation on one’s base pay that could leave to an even larger budget for insurance purposes…all factors that would make this visual look even better than it already does!
One additional thought we have not discussed yet is the fact that at both the Age 25 & Age 28 options the full $100k Option still left us below our actual budget. At 25 our budget under would be $286 yet if we take the full $100k OPAI our total premiums would be only $258 per month. At 28 the budget is $347 per month but our total costs after taking the full $100k option only come to $324 per month.
This leads us into the discussion that if a client can afford to purchase more than the full OPAI today then why wait an additional 3 years (if healthy) to increase their insurance plan. Why not “pre-pay” a portion (if not more) of their next OPAI option today while younger and therefore at a lower cost!
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18. “Pre-Purchasing” OPAI OptioNs.
To drive home this point, here is another slide that speaks to the value (when able) of purchasing additional coverage TODAY vs buying it over time.
Read off the numbers in the slide to show the impact long term of buying more today…
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19. Coverage by following 5-5-10.22
Rank
O-1
Insurance Budget (5%)
$200
WL Coverage
$375,000
($100,000 OPAI & WP Riders)
WL Gtd. CV $0
WL RPU 25
O over 3
$286
$523,262
($100k OPAI + $48,262 policy) $0 28
O over 6
$347
$623,262
($100k OPAI)
$5,104
$38,250 31
O over 8
$361
$636,084($12,822 OPAI)
$14,530
$97,073 34
O over 12
$438
$725,093
($89,009 OPAI)
$27,759
$165,255 37
O over 14
$449
$733,377
($8,284 OPAI)
$43,357
$229,259 40
O over 18
$514
$789,046
($55,559 OPAI)
$62,958
$296,662 43
Retired O-5 over 20
$514
$789,046
$85,436
$358,438
If we then go back to our example and were to look into pre-purchasing additional coverage beyond the $100k OPAI at Age 25 (assuming health is still intact) then our prospect/client can buy an additional $48,262 in coverage while remaining on budget. This means adjusting future OPAIs downward potentially BUT buys more coverage while younger which always leads to savings & improved benefits. In fact, this improves our totals at military retirement by ~$15k on the Death benefit, $3k on the Cash Value & $12k on the RPU value!
As you can see the OPAI Rider can be extremely valuable and most of the quote requests we receive (where it makes sense) ask for the OPAI Rider to be included. This however does not speak to the fact that you as advisors our potentially missing out on a golden opportunity for both the clients and yourselves…
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20. The opai opportunity.
Here we see the amount of OPAIS available annually with Transamerica Premier (Monumental) from 2001 through We also see how many of those options were taken and eventually place. For instance, in 2014 there were 6,337 options there were eligible to be exercised. Of those options only 1,730 of them were actually placed for a rate of 27.3%!
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21. The opai opportunity. Average % taken 2001-2014 30.01%
In fact over this time period the average percentage taken in a given year came to only 30.01%. Even during the time frame the number still only topped out at just under 35%.
So what’s the point….
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22. Opai conversation best practices.
Discussing the OPAI Rider on the Base Policy
How to have the OPAI conversation with clients when an option is coming up
The point is that I believe First Command Advisors do a good job of adding the OPAI Rider to the base policy on new contracts as most quote requests we receive at CompEdge have some amount of OPAI Rider attached. However, how that OPAI Rider is being described/sold upfront & how advisors speak to clients about OPAI options when they become available are both conversations that we believe can lead to an increased % of OPAI options being taken. This is “low hanging fruit” if you will and as Alan Orr once told me, “Why buy a rider you never plan on using or will only use in a dire situation?” “Why not make it a part of your plan?”
With that being said, we now will explore best practices that we have gathered from successful advisors when it comes to how they handle OPAI conversations that take place during the initial sale (rider on the base policy) and at option dates as well.
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23. Discussing the base policy opai rider.
When evaluating insurance options, a need for the specific type of insurance coverage should be clear. Any guaranteed benefits associated with insurance coverage are dependent on the claims-paying ability of the insurance company issuing a particular policy.
1/20/2020
1/20/2023
1/20/2026
1/20/2029
1/20/2032
1/20/2035
1/20/2038
1/20/2041
1/20/2044
When it comes to adding the OPAI Rider to the base policy from the get go, FC advisors as a whole have a ton of success in doing so and most utilize the simple 101 conversation (slide seen here) in order to introduce the idea of guaranteed insurability to clients.
What we learned from speaking to a few top advisors though is they go the additional mile and really focus in on the role it (THE OPAI RIDER) will play in future needs and decisions (see model). This is important. The guaranteed insurability aspect is huge in that we cannot guarantee our clients health long term but there is more to OPAI than just being an out if unhealthy.
For starters it provides guaranteed insurability no matter what which come in big when looking at other, non-medical reasons one might not be insurable or rated:
Occupation (EOD, Special Forces, etc.)
Avocation (Pilot, Jumper, etc.)
Geographical Location (Hazardous areas)
It is also equally important to show them how OPAI options (at regular intervals) align with future need increases throughout their military career. Why have your clients pay for a rider that the only plan on using if they are highly ratable or uninsurable due to healthy reasons? The need for additional coverage (and the ability to pay for it through an increasing income/budget) will be there so make sure to highlight this when speaking to your young active duty clients/prospects. As one advisor told us, “I always tell them by purchasing the OPAI Rider they are purchasing the privilege to add additional insurance coverage at opportune times throughout their military career.” He then told us this is a big deal when discussing OPAI options as they come due which is where we will turn our attention in a second.
Before we do so however, the other tip we received from a top advisor when it comes to the OPAI visual shown here (from Insurance 101) is to use the visual as a reminder of when future options dates come up. Print out the slide and when your client agrees to purchase the WL with OPAI Rider go ahead and write down all future option dates on the slide to use as a reminder when options are coming up. These tips make a world of difference when it comes to the discussion advisors have with clients when an option is coming due which is where we will now focus our attention.
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24. Discussing an upcoming option.
Do you have a current need for more coverage?
Will you have a future need for more coverage?
Are there any insurability concerns?
Is the cost affordable?
Do you have a need to preserve contingent options?
When evaluating insurance options, a need for the specific type of insurance coverage should be clear. Any guaranteed benefits associated with insurance coverage are dependent on the claims-paying ability of the insurance company issuing a particular policy.
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The first thing to speak to when it comes to upcoming options is to make sure everyone is aware of the fact that they should be getting a Consolidated Suspense Report that details all client options coming up within the next 90 days. This is a great list to remind advisors that they have clients with options coming due that they need to speak to.
How you go about contacting these clients differed from advisor to advisor that we speak to but all said selling the rider correctly on the base policy (whether them or another advisor) is the first key to having the client understand the importance of taking OPAIs…especially early on.
That being said, one advisor we spoke to says he hates waiting until her gets the CSR to speak to clients about an upcoming option. To him, this comes across as a “fire sale” in which he becomes a salesman instead of the planner he is. Instead, he prefers to tie these discussions/decisions into the planning process. In fact he pulls up the visual we mentioned on the last slide that has all future option dates written on it and brings up the next option date at every single AFR. This ties it to the planning process and always keeps the topic on the clients mind and allows the advisor to remind the client of the importance of the OPAI Rider. Then when an option is coming due the following year he can notify the client in the prior year’s AFR and schedule the next future AFR in advance of the OPAI Option Date coming up!
During the AFR (in the year of the Option Date) would then be the perfect time to reiterate the sentence from the previous slide…”Remember that by purchasing the OPAI Rider years ago you purchased the privilege to add additional insurance (without proof of insurability) at opportune times throughout your military career…this is one of those times.”.
Three other tips we received when it comes to discussing a current/upcoming option with clients:
Don’t talk price over the phone. This makes it all about cost and not about value. It is important to get them to come into the office and
One advisor we spoke with uses a set of 5 questions when discussing with the client whether an Option makes sense. Those 5 questions are:
Do you have a current need for more coverage?
Will you have a future need for more coverage?
Are there any insurability concerns?
Is the cost affordable?
Do you have a need to preserver contingent options?
Based on our discussion do you feel it is prudent to exercise this option today?
If clients took smaller base policies with the OPAI Rider added due to budgetary reasons then make sure to recognize the importance of the first few OPAI options…and the Pre-Purchase opportunities that exist at these options as well!
This ends our OPAI best practices section so let’s finish the OPAI conversation today to speak to a case study centered around upcoming options/conversions available through AG (Old Line & All-American).
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25. AIG opai case study. Female Age 24 (Nearest Age 25)
Current AG Elite Whole Life Policy for $25k with $25k GIO & WP Rider
Upcoming OPAI Available
Client is a healthy non-smoker
Specifically we want to show you 3 situations/case studies involving upcoming OPAI options/conversion opportunities with AIG and how if the client is healthy & insurable better options may exist through the purchase of a new policy with either Liberty National or Transamerica Premier. Our comparison template can help you lay out this discussion with clients in a way that may better their situation moving forward while also rewarding you the advisor as well!
The template you are about to see in all 3 situations has been around for a few years but we are seeing requests for such comparisons more and more. This is due to the fact that a few years back AIG made the decision to increase rates on their Elite Whole Life policy, drop commissions and stop new sales of the product as well and more recently they approved the Elite Whole Life 2 policy which further reduced Cash Values & increased the price of the Waiver of Premium Riders on policies taken via an OPAI or conversion option.
In our case study we have a Female, Age 24 (nearest Age 25) who has a current Elite Whole Life policy for $25k that her parents bought for her back in the day. It has a $25k GIO Rider as well as WP Rider on it and she has her first option coming up at Age 25! The client is a healthy non-smoker which means other options outside of the GIO Rider may exist so let’s explore those options!
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26. AIG option vs new whole life purchase.
$125k AG Elite WL 2 w/ WP & Keeping Base GIO
$100k Trans Premier QWL w/ $100k OPAI & WP +
$25k AG Elite WL w/ WP
$100k Liberty National WL w/ $100k OPAI & WP + $25k AG Elite WL w/ WP
Monthly Premium
$80.21
$ $16.08
$ $16.08
New Effect on Premium vs Stand-Alone Option with AIG
$75.19
($ $ $1.81 for dropping GIO on Base Policy)
$76.36
($ $ $1.81 for dropping GIO on Base Policy
AG GIO Refund
$543.75
Cumulative Total of Future Options/ Contingent Options
$350,000
$900,000
(save Age 25 option by Age 24)
Marriage & Stork Options
None
Available
Available + Separation from Service Option
Starting on the left we have the option of sticking with AIG. At Age 25 our client would have a 5x multiplier on her $25k GIO Rider meaning she could get up to $125k of additional coverage. This would come at a cost of $80.21 per month, would get her a GIO Refund of $ and would allow for to have future cumulative options on her base policy of $350,000 but no Marriage & Stork options.
Regarding the GIO Refund, don’t forget that if you take an option, all prior GIO Rider premiums paid are refunded! This is a big deal especially on the first option on what was a juvenile policy in which the rider may have been paid for over a 20+ year period (hence the nice size refund here). Future options will only return 3 years worth of rider premiums and if the Age 25 option is not taken then at 28 you only get the previous 3 years not all prior years so this is important to remember.
That being said, in order to get the full GIO refund one does not have to take the full option of $125k! All that is required is that you take at least a 1x multiple which in this instance would be $25k. So what if instead of taking $125k with AIG, we instead took $25k with AG & took out $100k with $100k OPAI Rider & WP Rider with either Trans Premier or Liberty National and dropped the GIO Rider on the Base AIG Policy?
If we did so with Trans Premier the total premium would come in at $75.19 which is right at $5 less per month than AIG! In addition the client gets the following benefits as well:
We still get the refund check from AG of $ for taking the $25k minimum option.
By purchasing a $100k OPAI Rider with Trans Premier and dropping the GIO Rider on the AG base policy we gain $550,000 in potential future guaranteed insurability through normal options & contingent options for a total of $900k (note that Trans Premier is age nearest so we still have our Age 25 option available almost immediately in this situation).
We also gain Marriage & Stork options in addition to the options already mentioned!
The same holds true for Liberty National! Liberty would be an additional $1 above Trans Premier but all the same benefits apply PLUS you gain the separation from service/retirement option if in the military and exercised before Age 45!
These are all great benefits to pursuing a new policy with Trans Premier or Liberty National to better your client’s plan and along the way you get paid more as well. A true win-win again!
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27. Military Retirement
This wraps up our section in regards to OPAIs and how they can play a vital role in meeting a client’s insurance needs throughout their military career. What we have not done to this point though is highlight why the visual we have shown (with almost $800k in DB at military retirement backed by wonderful cash values and RPU values) is so valuable beyond one’s military career.
In order to establish this we will now turn our attention to a case study showing an individual getting ready to retire from the military and transition into civilian life.
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28. The role of wl at military retirement
John Doe
O-5 Base Pay - $8,500/month
Retirement: 42
0-5 (20 Years) Pension- $4,244.70/month
Full SBP - $2,334.59/month
Full SBP Cost - $275.91/month pre-tax
Pending Civilian Pay - $10,000/month
Permanent Life Insurance Need: $1,000,000
Here we have John Doe, Age 42, who is an 0-5 making $8,500/month with 20 years of service and is getting ready to retire in the next few months. His pension will be $4, per month and therefore should he elect Full SBP it would provide a benefit of $2, per month with non-gtd. COLA at a deductible cost of $ per month. John has also lined up a civilian job upon retiring from the military that will pay him $10,000 per month.
John is coming into to meet with a First Command Advisor in order to make sure he has a good understanding of benefits he will be receiving, such as SBP, as well as benefits that are going away, such as SGLI. He wants to make sure that he makes sound financial choices to make his transition to civilian life as smooth as possible. Part of this discussion will include a proper life insurance needs analysis to ensure that John’s spouse is properly protected should he pass. At military retirement this survivor need is likely to change as John’s pension kicks in, some benefits go away and he begins his civilian career.
Assuming John elects Full SBP (AND IT SHOULD BE SAID THAT FIRST COMMAND’S STANCE REDGARDING RETIRING MILITARY CLIENTS AND ELECTING SBP IS THAT FULL SBP SHOULD ALWAYS BE ELECTED) then our needs analysis (which factors in assets, income & any existing insurance) shows that in addition to the SBP benefit his spouse would need $1,000,000 (rounded for the purposes of our case study) in permanent coverage to properly protect her against his passing.
In addition to these needs, there is also an additional temporary insurance need of $148,000. Currently John has $400k in SGLI coverage which is why the need is only $148k but upon retirement John must make a decision regarding his SGLI. Our recommendation would be to meet his temporary need (enhanced by SGLI going away to $548k from $148k) with $550k term coverage ($400k to properly replace the $400k in SGLI that will go away and an additional $150k to meet the remaining shortfall. A proper term period should be chosen to meet these finite needs (likely a 20 or 30 Year level term policy).
For today however we will focus on the permanent insurance need and the real goal of this case study is to speak to how purchasing whole life under the plan throughout one’s military career can help ensure that a spouse is properly protected from a premature death according to our needs analysis.
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29. Life insurance as an option.
65% ROP = $63,893
100% ROP = $131,062
100% ROP= $163,827
So how do we make sure John gets the full $1mill in protection that his spouse would need without breaking the bank? In order to secure $1mill in Death Benefit on the ANICO Signature GUL it would cost $ per month if paying to Age 100 in additional monthly costs. The ANICO Signature GUL is extremely well priced at John’s age and at the face amount considered. In addition to competitive premiums, the ANICO Signature GUL also offers the ability to “cash-out” the policy in years 15, 20 or 25 if coverage is no longer needed for reasons such as the spouse the policy is there to protect passing before John. How this cash-out option works is in Years 15, 20 or 25 John can choose to cancel his ANICO Signature GUL and receive a refund of premiums paid. In year 15 this would equal 65% of premiums paid (or $63,893 in John’s case) and in Years 20 & 25 this would equal 100% of premiums paid ($131,062 or $163,827 respectively).
This is a nice built-in benefit that provides additional control for life’s “what-ifs”.
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30. Life insurance as an option.
In addition, the ANICO SGUL also have built-in ABR for Chronic, Critical & Terminal Illnesses. This allows for John, should certain criteria be met, to accelerate his Death Benefit while living to cover the cost of care or to use in any ways he and his spouse deem fit. This is an added living benefit not available through many other options.
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31. Winning the battle before it is fought.
Age 43
Rank
Retired O-5 over 20
Insurance Budget
$514
WL Coverage
$789,046
WL Gtd. CV
$85,436
WL RPU
$358,438
Even with these additional benefits and extremely competitive premiums, this represents a large premium commitment (in addition to the $275.91/month cost for SBP and the cost for purchasing a $550k 20 or 30 Year Level Term) to someone who is currently transitioning to civilian life. Some clients may be ok with this premium but for others it could cause “sticker shock”.
To avoid this “sticker shock” ideally our retiring O-5 would have worked with their advisor in advance of retirement to come up with a game plan for meeting this large permanent insurance need. If a client simply waits until retirement to properly protect their spouse against their untimely death then “sticker shock” may not be avoidable. In our case study, to this point, we have assumed John has no permanent insurance already in place. The hope is though that your clients will have something in place but it is not likely that many will have the true need already covered when retiring from the military.
But what about our client that started with us as a young officer and had followed the plan throughout the military career? That individual when retiring from the military would already have $789,046 in guaranteed, permanent Death Benefits along with $85,436 in guaranteed Cash Values & $358,438 in Reduced Paid-Up insurance if elected. If John had followed this plan throughout his career (and let’s assume for a minute that he had) then the amount of permanent insurance he would need to purchase would not be $1,000,000 but would be lowered to a much more reasonable ~$211K!
As I mentioned earlier, this is not just for show but can have a large impact at and through retirement!
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32. Whole life “for the win”.
CONTINUE WHOLE LIFE PREMIUMS ON $789,046 IN EXISTING WHOLE LIFE COVERAGE & SUPPLEMENT WITH A SMALLER ANICO SIGNATURE GUL OF $250,001.
This would create an additional level of CONTROL for life’s “what-ifs”
What these policies would have done for John (assuming he had followed the plan) is they would have given him options…they would have given him CONTROL! If John had followed the plan he would again have a much smaller need of ~$211k and would have options at his disposal. To meet the $211k shortfall we would recommend purchasing a $250,001 ANICO Signature GUL policy.
Why $250,001 vs the need of $211k? Because there is a serious per unit price break at $250,001 with ANICO in addition to better underwriting classes being available as well (Std. Plus, Pref. & Pref. Plus NT).
By doing so John would pay $146.75/month for the $250,001 ANICO SGUL policy in addition to his $514/month in existing premiums for his whole life coverage. This would allow John to have more control of his life insurance plan for life’s “what-ifs”. In addition to meeting his permanent insurance need, John would have all contingent OPAI options in tact (assuming he qualifies for them), would be able to keep his Disability Waiver of Premium Rider (drops off when you RPU a policy) and would maintain ultimate control by still having his guaranteed cash values & all non-forfeiture options at his disposal if needed while also getting an additional $39k in coverage as well through the ANICO Signature GUL!
This leaves no doubt that purchasing whole life throughout one’s military career not only meets soldiers’ current needs but can play a huge role in helping them succeed beyond their retirement from the military!
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33. THANKS
This wraps up our presentation today. We hope each and everyone of you found something in this presentation that you can implement in your practice and make 2018 your best year yet. Thanks and have a great day!
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