Life Insurance

Universal Life Beats Term!

Presented by Brian Leising For those who attended the Financial Brokerage 2015 Sales Summit (and those who couldn’t make it), two of the most popular sales ideas proved that Universal Life Insurance could cost your clients less money than Term Life Insurance!  Here are two scenarios from Prudential and Protective Life: Prudential UL Beats Term– This works for clients who have ample cash flow.  The example is attached.  A male age 63 could purchase a 20 year term for $9715/year, paying a total of $194,300 over 20 years.  You could save him $33,132 by selling an 8-pay UL for $20,146/year (total outlay $161,168).  If the annual premium is too high, you could drop it down to a 12-pay for $14,410.  This saves the client $21,380 for a total outlay of $172,920.  In all scenarios, the client has $1,000,000 of death benefit for 20 years.  With the UL, he saves money and has the option to continue coverage by resuming premium payments.  He would be too old to convert to a permanent plan at age 83.  By the way, the commissionable target premium on the UL is $19,910 versus the $9715 for the 20 year term.  Do you want to overpay for term with no options or save money and maintain your options with a UL? Protective Renting (term) vs. Owning (UL) – Owning usually costs less than renting over time and life insurance is no exception.  Our example was a 45 year old male preferred non-smoker purchasing a $250,000 lump-sum death benefit with an Income Provider Rider paying an additional $60,000/year for 10 years.  If he purchases a 20 year term at age 45 and a 30 year guarantee UL at age 65 his total outlay will be $404,494 by age 95.  If he instead purchased a UL with an age 95 guarantee, he would only pay $221,400.50 over the same time period.  That’s a 54% savings!!!  What could your clients do with an extra $183,093.50? Pru UL beats term Protective UL beats term
  Term Universal Life
Age 45 annual premium $938.21 $4428.01
Age 65 annual premium $12,857.60 $4428.01
Age 95 total paid $404,494 $221,400.50
 
Life Insurance

SELL MORE INDEX UNIVERSAL LIFE BY ASKING FOR LESS…

Presented by Brian Leising   When presenting Index Universal Life (IUL), we usually position the product as an either/or decision.  You either place your retirement dollars in an IUL or continue placing them in your 401(k).  When it works, this all or nothing approach is great.  What happens when this approach fails? Do you think some people are afraid to place all their eggs in one basket?  Consider this: don’t ask for all their eggs, just a few.  Here is the second way you can position IUL as a retirement plan supplement: Consider positioning IUL as a resource to tap during down markets.  During retirement, people need a steady income whether the stock market is up or down.  If a client withdraws money from a qualified plan invested in stocks when the market is down, they are selling at a loss.  This has a detrimental effect on their total funds over time.  What if they did not have to sell at a loss? What if they had an alternative fund to draw from in those down years?  Here is an example: The years 1973 through 1993 included five years with stock market losses.  Using this strategy, a client would only need their IUL to cover five years of loans or withdrawals, not all 20.  Since clients pay taxes on withdrawals from qualified plans, not on life insurance loans, the net amount needed from loans is actually lower than their qualified plan withdrawals.  You don’t need to ask for nearly as much money to fund five years of a reduced income need.  It should be much easier to redirect a portion of a client’s retirement contributions than all their contributions. How can these two ideas presenting IUL as a retirement supplement lead to more IUL sales?  1) Prospective clients tend to be more receptive to redirecting or moving some of their money rather than all of it.  This will help you close more sales.  2) Once they see the benefits of having an IUL, clients will ask to place even more money into the contract.  They will even think it was their idea.
Life Insurance

SELL MORE INDEX UNIVERSAL LIFE BY ASKING FOR LESS…

Presented by Brian Leising   When presenting Index Universal Life (IUL), we usually position the product as an either/or decision.  You either place your retirement dollars in an IUL or continue placing them in your 401(k).  When it works, this all or nothing approach is great.  What happens when this approach fails? Do you think some people are afraid to place all their eggs in one basket?  Consider this: don’t ask for all their eggs, just a few.  Here are two ways you can position IUL as a retirement plan supplement. One way to position IUL as a retirement plan supplement requires knowledge of social security and tax planning.  The IUL becomes one of three components in a comprehensive retirement plan.  To make this work you need to understand two features of the social security program: 1) if a client receiving social security benefits also receives taxable income, their social security income may be taxable; 2) social security benefits increase if a person waits until age 70 to receive benefits.  If your client has sufficient resources, they can maximize their social security income and minimize taxes simultaneously.  Here are the steps to make this happen:
  • When the client retires, they should withdraw money from their qualified plan first. Reduce the fund as much as possible.
  • At age 70 the client begins social security payments.
  • If they still have money in their qualified plan after age 70, they will need to take required minimum distributions. For most people, RMD’s will be low enough to not affect the taxation of their social security benefits.   Of course, social security and RMD’s together may not provide enough funds for your client’s living expenses.
  • Now their IUL can help. The client can take tax-free loans from their policy with no effect on the taxation of their social security benefits.  If their qualified retirement plan was liquidated, they would pay no Federal income taxes for the rest of their life.
You do not have to fund the IUL as their sole retirement vehicle.  Use the IUL as a planning component along with their 401(k) and social security income.  By waiting, their IUL has more time to grow, their social security benefit has more time to grow, and your client enjoys greater net income due to lack of taxation. Look for part two next week.