Like just about any purchase these days consumers have an abundance of product choices. It's no surprise with all these choices that 9/10 consumers say they are confused with their insurance options. Let's review some of the pros and cons of whole life insurance for clients transitioning into the next phase of their lives and look at strategies to help them see the value.
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Level locked in premium that can be the most cost-effective (depending on client age) even when adjusted for PV (present value).
This is a 40-year-old male non-smoker for $1,000,000. Make sure you have LDA to do a complete analysis for your client as this calculation looks a lot different for clients of different ages or with a different discount (r) value.
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Cash Value let's be honest cash is king. It would be great if all insurance let you cash out and get at least some of your "investment" back (I'm looking at you P&C insurance) Make sure you are transparent about the guarantees involved in the product they are purchasing
LDA can contrast total, reduced and guaranteed values in a visual making it easy for your clients to understand and gain confidence in the product.
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Riders and dividend options - Most people will have a changing need for insurance over time. This can be in the form of liabilities being eliminated or it can be a need to increase insurance to preserve an estate from inflation. Luckily whole life has you covered. It's an extremely flexible product that can be used in conjunction with term riders to plan for changing needs and/or in the case of participating insurance can be used to fight inflation.
Show clients term rider options or how with our PV control you can show how the insurance benefit holds up to inflation.
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Estate tool/Corporate Tax shelter vehicle. Let's face it for the affluent market-saving tax is going to make the net return unbeatable. If you have a corporation and cash flow or need to transition wealth from one generation to the next whole life is your knight in shining armor (stay out of my pockets government)
Our equivalent IRR report components level the playing field against a taxed vehicle showing what the clients would have to make based on their tax bracket to match the insured product.
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It often relies on assumptions. Many participating whole life plans have a guaranteed pay length that can guarantee premiums will end and coverage will be in force. However these plans normally come with additional premium cost that advisors often skip to make the already high premium more palatable to their clients, combine this with a plan that is designed to offset based on a current dividend your clients can be in for a surprise (unfortunately this usually comes after a decade or more) Some dividend options (looking at you enhanced plans) often combine a YRT(yearly renewable term)component that assumes it will be replaced by the PUA of the base however if the dividend declines these policies may lapse and it's not always made apparent to clients or advisors that this is the case.
LDA can compare the impact a dividend change can cause or show enhanced plans vs a layering of term riders. You may find a better IRR and similar cash value with less risk of underinsuring your clients in the event of a dividend decrease.
Like the other products and services your clients buy they want to be educated on their options and want to make sure you have done your homework to get them the best possible solution for their individual needs. With the complex nature of insurance product pricing, it is essential you do your due diligence when vetting and stress testing these options. Your clients will appreciate that you have invested in the very best tools to perform your job and will be happy with the added level of disclosure and education you can provide them. If you are interested in using LDA to enhance the research and communication you offer your clients sign up at www.lifedesignanalysis.com we have a free 30-day trial with no credit card on sign up.
Want a hands-on training session with Jon or Nik from our support staff by clicking their name and see how Life Design Analysis can help your practice.
