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How to Put L&H Insurance in the P&C Agency - Part 2 of 3

Author: Dick Hartzen

Many insurance agencies have found it easy to increase revenue and services offered by adding life and health insurance to the agency portfolio. Numerous prospects already in the agency client list have been overlooked for many years. This short series of articles shows you how you can improve retention and the agency's bottom line. The topic for Part 2 is “Figuring Life Insurance Amounts”.

It is required to discuss Social Security and the benefits that are provided when computing life insurance needs. Some people do not believe that Social Security will be in existence in the future. The magical retirement age of 65 was chosen when it was passed in 1935. The average life expectancy at that time was to age 59 ½.  That item alone is one of the reasons that Social Security is in financial difficulty. Those receiving benefits (beneficiaries) are living longer as are their dependents.

Most people will want Social Security included in their financial planning. There is a Statement of Benefits mailed out to taxpayers yearly showing their projected benefits. *

If an insured does not have this form handy, it can be requested on line (


Family income needs with children under age 18:

Needs $_________________ per month

Social Security $_____________per month *

Other family income $____________per month

Balance needed $_____________ per month

a. Multiply by 12 to get yearly income needed $___________(a)

b. Years until children reach 18 __________ (b)

Multiply a X b for need #1 $_______________   (1)

Spouse age when youngest child reaches 18 _________

Years until spouse reaches age 67 ______________ (a)

Needs $_____________ per month

Social security (black out period) income $-0

Other family income $_____________ per month

Balance needed per month $___________

Multiply by 12 to get yearly income needed $___________(b)

Multiply a X b for need #2 $__________________ (2)

Spouse monthly income required at age 67 $______________

Social Security benefit $___________________

Other spousal income $___________________

Balance needed $_________per month 

Multiply by 12 to get yearly income needed $_____________(a)

Number of years until 84 (**) _____________(b)

Multiply a X b for need # 3 $_________________(3)

** Most financial planners use age 84 as the period required. This should be discussed with the insured. (Health can change this age).

Items to be added/discussed:

Mortgage balance $___________________ (4)

Some insured do not want the mortgage paid off. It is a tax deductible item and may be lower than can be earned elsewhere. If this is true, include the mortgage monthly payment to the family needs.

Education funds $__________________ (5)

An amount can be allocated or the monthly income can include the probable costs.

Readjustment funds $_________________ (6)

The College for Financial Planning suggests that a figure equal to ½ of the yearly income be included. This would give the spouse time to adapt to the change in his/her financial life.

Emergency funds $____________________ (7)

Emergencies arise in every life (new roof, illness, loss of job) that can devastate any financial planning. It is suggested that ½ of the yearly income be set aside for this problem.

Final expenses $_______________________ (8)

Funeral costs (?$15,000.00), outstanding obligations (car payments, credit cards, etc.), death taxes and unpaid medical bills should be added to the financial burden left to the family.

Amount Needed:

1. Add (1), (2), (3), (4), (5), (6), (7), (8) $____________________

2. Subtract current life insurance      $____________________

3. Subtract liquid assets ***               $____________________

4. Balance required          $____________________

*** do not include assets that will not be liquidated – (art collection, summer condominium –etc.)

Part 1  Part 3 

Copyright 2010 by Richard I Hartzen. Used with permission.


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