The R.U.T.A. Report: In Praise of Plain Vanilla

by 18 Feb 2015
There are many fancy ice cream flavours, but my favourite is plain vanilla – when I eat any ice cream at all that is…

“Plain vanilla” is also the phrase that the late Al Granum of “One Card System” fame called selling life insurance for the most basic reasons – because you love someone or you love some thing.

Just as there are many ice cream flavours, there are many strategies to sell life insurance too. Many of them are very complicated and appropriate in only limited circumstances with a few prospects. That’s just like some ice cream flavours. On the other hand, plain vanilla can go with just about anything. So does basic life insurance programming. Here’s what I mean.  

Life insurance is a character product. The more character a client has, the more life insurance they are likely to buy.  It takes character to buy life insurance because someone else’s safety and security has to mean as much to you as yours does.  That’s character. There is no other reason to spend after tax money on a benefit that only accrues to someone else after you are gone.

So, if you have the character to sell it and the prospect has the character to buy it, the question is just how much and what kind? There are many complicated calculators and financial planning techniques to get at the answer.  But, the plain vanilla philosophy suggests we can use rules of thumb and basic math and do the job.

For instance, professional associations have recommended their members buy 7 to 10 times their net income after expenses but before taxes to protect their families. It’s ironic how all the planning I’ve seen over the years is very close to that number for most people.

Another rule of thumb is that it takes 1 million dollars to replace $30,000 to $50,000 of annual income. It’s not hard to figure out how is needed this way.

Whether you use 30 or 50 depends on how fortunate you want your survivors to have to be in the stock market when you are gone. To this income replacement number add loans to be repaid, education funding, charitable bequests and final expenses. That will tell you what you need in plain vanilla.

Always be sure to buy the right amount of life insurance before you consider the “right” type. The amount of benefit is always the overriding consideration. Once you have the right amount, you can always improve the quality if you choose to.  The idea is to take care of the people or the things you love first.

When you do you may not be the “Maple Chocolate Walnut Crunch” of the marketplace but you will always be someone your clients can count on.  Plain vanilla may not be fancy but it always does the job.  I say, start there.

The RUTA Report – Real Usable Tactical Advice – is provided exclusively to the Canadian Life e-newsletter each week by veteran financial industry consultant, speaker, writer and media commentator Jim Ruta. Starting at age 22, he led one of Canada’s largest insurance agencies by age 40. Jim has been featured around the world including the MDRT Main Platform and has several best-selling books to his credit. He is Managing Partner of Boston-based InforcePRO Software, a unique automatic presentation from existing policies system.