What Can We Do to Put Clients Back in Control – Part Two

-by Marc Schwartz

In my previous blog I explained how many of our clients feel as though what they want and expect from their life insurance policy is no longer in their control.  Because some life companies have taken actions that create additional uncertainty and expense for their customers, it’s up to us, as experienced professionals, to find a way to put our clients back in control.  The key is to know what’s important to your clients and then find the products and features that deliver the predictability and value they expect.

Golden key and puzzle

No Lapse Guarantees (NLG)

No question that we’ve seen a dramatic retraction of the “perfect product” in the wealth transfer market. Many of the carriers that have remained have raised prices and/or capped face amounts, and that trend continues. But there are a handful of high quality carriers that are committed to the NLG space. One shining star that is a consistent leader in the benchmarks is wholly owned by a leading Japanese insurer. This same carrier is a relatively recent entrant to the high-end life insurance field and, with no significant historical block of NLG business, isn’t subject to the drag created by its in force legacy. NLG has not gone away…and major, well-rated players provide cost effective solutions which are guaranteed to meet client expectations.

No Lapse Guarantees – with Exit Strategies!

Ever have a client who acknowledges a current need for life insurance today but who balks at buying? Perhaps they’re not comfortable cutting big premium checks for a future obligation that may morph into something unrecognizable, increase costs, reduce benefits or even vanish completely? Or maybe they’re concerned that new and different problems could arise down the road — such as living too long or getting seriously sick along the way. Is the product you recommend nimble enough to address these kinds of concerns? What if clients could buy an option to “take the money and run” at certain points in the policy’s future? This is a compelling way to provide ironclad guarantees with optionality — helping clients overcome the perception of NLG as being inflexible. And by using a “split policy” approach (splitting the face amount into two policies), you can give the client three guaranteed options down the road:

  • Keep the coverage as is and continue paying premiums
  • Cancel both policies and receive all premiums paid back
  • Keep policy 1, cancel policy 2, and use a portion of the premium refund to fully pay up policy 1 while maintaining a guaranteed death benefit for life

Extended Guarantees – VUL and IUL

And, of course, you have clients that want the best of both worlds: a secure death benefit along with the potential to build cash value greater than what could be generated in a fixed NLG contract. There are multiple options for this hybrid solution including both Index UL and Variable UL flavors. Among these options, we have extended guarantees (typically to or around life expectancy) and true lifetime guarantees. One life insurer that we’ve had tremendous success with uses a VUL chassis with less restrictive AG37 reserving requirements, offering an inexpensive guaranteed death benefit with all the upside associated with true VUL. The same design is available as Survivorship VUL.  These products are exceptionally competitive in single and short pay scenarios and are the 1035 solution in the marketplace when NLG is a consideration. So, if you kept your FINRA registration…then you need to be thinking about Variable again!

Guaranteed Income Streams – For Life!

Over the last few years, many of us have pivoted to cash accumulation sales with IUL being the product of choice. Although these products allow upside participation and downside protection, they still are vulnerable to market influences and, to some extent, the ability of carriers to press buttons and pull levers. Even though some of these products offer extended guarantees, projecting future cash values and distributions is a bet heavily reliant on forces outside of your control.  As a way to address client concerns regarding future income, there are a handful of life insurers offering a Life Income Benefit Rider (LIBR). When the client is ready for income distribution, they can elect to exercise this rider and receive a level guaranteed income stream for life (calculated based on cash value at the time of election). In addition, a minimum death benefit is guaranteed for life regardless of total distributions made. And distributions are all loans, taking care of any tax issues. Think of it as a life policy morphing into a “life only annuity” but with no adverse tax consequences under current tax law. IUL is a product with many moving parts and LIBR allows client to “lock in” potentially tax-free income for life — which probably was their motivation to buy in the first place.

That’s just a sampling of how you can tailor the life insurance products and features available today to fit your client’s need for assurance, security and predictability.  As a trusted advisor and, in many cases, a friend of your client, one of the most valuable and lasting services you can provide is to have the tools, resources and knowledge to help put your client back in control.