July 21st, 2020
I spend a lot of time on the phone with agents, every day discussing life insurance and running illustrations. The majority of the time, the agent understands what the client wants or needs, and we at ProducersXL simply fit the client with a carrier that aligns with the price, underwriting process, and benefits the client is seeking. However, there are times when a case requires a more complicated solution. These complicated solutions may seem daunting, but with the subtle and straightforward ‘outside-the-box’ thinking, any client can be fit with a plan perfect for their situation. Let’s review a few examples.
Life Marketing Manager
The Term/Perm Combo:
This is a situation I run across frequently and is extremely straightforward. Often a client will have a need/want of a certain amount of life insurance and the cost is just a little more than they would prefer or can afford. Simply buying a combination of term and permanent coverage can get the face amount the client needs, at a more reasonable price. A 45-year-old male wants $1 million of life insurance. He has a wife and 2 kids about to attend college. Start with a $1 million GUL (Guaranteed Universal Life) to age 100 and the annual premium is $7,566. The premium is a little more than he would like to spend. Instead, review a $750,000 20 year term ($958 annual premium) and a $250,000 GUL ($2,145 annual premium). The overall premium is now $3,103 per year and he retains the full $1 million of coverage for 20 years, while he is still working and kids are attending college. Then at age 65, he still has $250,000 of guaranteed life insurance to last him to age 100. This is not a difficult concept, but it is often overlooked as a way to get the life insurance at a price the client can afford, while still meeting their needs.
GUL or IUL:
This is another situation I come across quite a bit. Often when we talk about permanent insurance, a very popular product is the Guaranteed Universal Life. It’s cheap, easy to understand, and can provide coverage all the way to age 100 or beyond. Really the only negative thing about a GUL is the lack of strong cash accumulation, if any at all. Even though cash accumulation might not be the goal for the client, wouldn’t it be nice to have in a policy, especially if they didn’t have to pay much more premium to get the cash. Let’s review the same example from above. A 45-year-old male wants $250,000 of GUL coverage to age 100. The annual premium is $2,145 per year. While he does have guaranteed coverage to age 100, he
has no cash accumulation in the policy after age 75. Now let’s look at an Indexed UL for the same $250,000 of coverage. The annual premium for the IUL is $2,252 per year…only $107 more per year than the GUL! The non-guaranteed cash accumulation at age 75 is now $102,000 and starts to over-endow at age 89. Oh, and did I mention the IUL also has the $250,000 death benefit guaranteed to age 100 on the guaranteed side of the illustration? For only $107 more in premium per year, the client still has the same guarantees but now has the potential for cash accumulation growth. Even if the client does not intend to use the cash, it’s just another option to cover unforeseen events further down the road. Life is unpredictable and your client might appreciate the opportunity for some cash in a life policy, especially when the cost to have it is comparatively inexpensive.
The Death Benefit Installment Option:
This situation is a little different and takes the right variables to work but is still a great option. In this situation, we’re looking at a 45-year-old male who wants to purchase $500,000 of GUL coverage to age 100. The annual premium for this policy is $4,290. Same guy, same product, same guarantees but this time we’re going to make some changes on how the death benefit pays out. The initial death benefit paid out at the time of death is $50,000 (to help cover a funeral and basic last expenses), while the remaining $450,000 will be paid to the beneficiary in installments of $15,000 per year for 30 years [$15,000 X 30 years + the initial $50,000 = $500,000]. The annual premium is $3,027. The client can buy the same $500,000 death benefit with the same guarantees for $1,263 less per year in premium. Again, this is just another way to think outside-the-box when thinking about life insurance options for your clients.
Life insurance can be a very straightforward process, but sometimes it takes looking at situations a little differently to come up with the best solution for your client. Please give me a call to discuss your next life insurance case. Thanks!