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1) What is A.L.P.S.™?

Answer:

Arbitrage Life Payment System.  This is a method of paying for life insurance.

A. A.L.P.S.™ is not a policy, it's a payment option.

1. Wealthy clients don't need to invest in universal life insurance.

2. The A.L.P.S.™ plan is designed to take advantage of the normal investment yield curve which states that the longer the investment the higher the return.  The A.L.P.S.™ plan arbitrages a short term borrowing index (Commercial Paper, LIBOR, Prime) from a Lender against a medium term crediting rate from a Carrier.  The result is a discount on mortality.

Further, the A.L.P.S.™ arbitrage does not have to make money to be successful.  The A.L.P.S.™ arbitrage only has to save the Policyowner money on the premium payments.

B. A.L.P.S.™ is funded with a universal life policy.

2) What is the market for A.L.P.S.™?

Answer:

A. Any sale where permanent death benefit is the primary insurance need.

1. Estate Tax Coverage

2. Buy/Sell Coverage

3. Key Man Coverage

4. 2nd to Die Coverage

3) What is the typical sales process?

Answer:

Step 1. Fact gathering and analysis

- Identify need

- Pick up 1040

- Pick up Personal Financial Statement
  (Blank ones are available from STP)

- Pick up corporate financial statements if corporately owned

- Complete a carrier application  and HIV form to determine if client medically qualifies

- Review marketing kit with illustration


Step 2. Documents should be forwarded to the Attorney and/or Accountant.


Step 3. Fine tune client illustration and pick up signed documents:

- Policyholder Agreement

- General Assignment

- Acknowledgement and Waiver

- W-9

- Collateral

4) Does the A.L.P.S.™ plan have cash value?

Answer:

A. No, the client sells it.

5) What happens to the cash value?

Answer:

The Trust uses it to pay the client's COI and expenses and to pay the interest on the loan. If there is not enough growth in the policy, a bill is generated.

6) How do rate changes affect the program?

Answer:

A. There are four scenarios:

1. If borrowing rates go up then more interest is due and a higher bill will be produced.

2. If borrowing rates go down then less interest is due and a lower bill will be produced.

3. If crediting rates go up there will be more earnings and a lower bill will be produced.

4. If crediting rates go down there will be less earnings and a higher bill will be produced.

The formula for determining the effect of a rate change is:

Single Premium x Rate change = Amount of savings or increase in the amount billed

Example: If the premium equals $300,000 and the Crediting Rate increases by 100 basis points there will be a $3,000 savings

$300,000 x 1% = $3,000 Savings

7) What do we do if rates are bad for a long period of time?
    (What is De-Arbitrage)

Answer:

If the A.L.P.S.™ method, for a long period of time becomes too costly, the client can de-arbitrage and pay for the policy at that time under one of the other many alternatives allowed  with the following additional advantages:

- No medical necessary at the time of "de-arbitrage"

- No surrender charges are in the "de-arbitraged" policy

There are many methods of paying for the Universal Life Policy used in the A.L.P.S.™ program if the policy ever "de-arbitraged".  Some of these methods include:

1. Monthly Premium
2. Quarterly Premium
3. Semi-annual Premium
4. Annual Premium

8) How is the client billed?

Answer:

Quarterly, if necessary. Money is remitted within 10 days. STP bills the clients and calls for collections. Agents will be called if there are any Client questions. 

9) Should clients buy all their life insurance through the A.L.P.S.™?

Answer:

No. A blend of different types of permanent coverage can build a source of money for future negatives.

10) Why should a client use A.L.P.S.™ instead of using a traditional annual premium payment method?

Answer:

Assuming 10 years of $15,000 payments made annually for a traditional universal life policy, the policy-owner would have to pay $150,000. The cash value would have grown to approximately $250,000. At death, the beneficiary would receive $1,000,000; $250,000 would be cash value so the net death benefit is $750,000. Using the A.L.P.S.™, the payments will be less than $15,000 per year, so the policy-owner will have paid less than $150,000. However, at death the beneficiary will still get $1,000,000. In addition, the estate will have all the cash saved on the premium plus the earnings on those savings; A WIN/WIN SITUATION.

11) Why does a client put up collateral?

Answer:

To Alleviate Carrier Risk

A. Carriers waive surrender charges

B. Discerns a true insurance buyer - No Free Lunch

12) Who else markets the A.L.P.S.™?

Answer:

Several attempts have been made but no successes

- Confidentiality Agreement prohibits copying

- Costly Research & Development expenses

- Strong carrier relationship required

- Strong bank connections required

- History of persistency necessary to attract Carriers

13) What is the downside risk of the A.L.P.S.™ to the client?

Answer:

It's a Win/Win situation.

- Client has the lowest cost method of paying for permanent life insurance coverage

- Client can always "de-arbitrage" if necessary

14) What are the underwriting requirements?

Answer:

Normal underwriting is required plus the documents listed in question 16. All applications and forms should be sent to:

STP Enterprises, Inc. 303 East Wacker Drive Suite 210 Chicago, IL 60601

STP will:

- Process applications 

- Order:  Exams, HOS, Blood Test, Treadmill EKG, X-Rays, Inspection, APS (Attending Physician Statement) & other requirements if necessary

15) What about rated cases?

Answer:

Through table 6 is usually not a problem on individual products and uninsurable can work on the 2nd to die product.

16) What are the names of all documents required?

Answer:

- Application

- W-9

- HIV Consent Form

- Policyholder Agreement (2 sets need to be signed)

- General Assignment (2 sets need to be signed)

- Acknowledgement & Waiver (2 sets need to be signed)

17) How does the agent get started?

Answer:

- Fax illustration request forms to STP at 312-819-0773, or fill out the Illustration Request on the web site.

"Illustration Request"

- Fax a copy of his/her life insurance license to STP at 312-819-0773 for processing.

 

 

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Last modified: July 21, 2003