July 9, 2014 by Pat Lanigan
On August 15, Brokers Life will host an exclusive live presentation by Tom Hegna, the bestselling author of Paychecks and Playchecks: Retirement Solutions for Life. After more than 3,000 seminars, Tom Hegna has become synonymous with helping financial professionals simplify retirement solutions for their clients.
In his presentation, he will lay out the real-world scenarios clients must face in organizing their retirement. And he’ll do this by drawing on nearly three decades of insurance industry experience.
I asked him to give me a sneak peak of what he’ll be talking about at his August 15 event. Here’s what I learned about his views of life insurance as a retirement strategy.
Life insurance as a legacy for grandchildren
With a permanent life insurance policy, a retiree may more than double a legacy gift to their grandchildren, with tax-free bequests to grandchildren through his or her life expectancy.
Using life insurance to cover final expenses
A permanent life insurance policy with a leveraged death benefit may be used to help cover final expenses and keep an inheritance intact.
Using life insurance to protect social security benefits
Permanent cash value life insurance can provide cash at death (generally income tax-free), and provide income for the surviving spouse.
Life insurance and taxes
Permanent life insurance premiums are paid with after-tax dollars. The policy grows tax deferred, and policy owners can access those cash values before or after retirement on a tax-free basis as long as it is structured properly. Upon death, the death benefit is paid to the beneficiaries tax-free.
To learn more about Hegna’s August 15 presentation, give me a call at 866.528.7933.
March 24, 2014 by Pat Lanigan
Although most Americans view life insurance as a necessity, many are underinsured or have no life insurance at all.
Here are some facts from LIMRA’s life insurance consumer studies:1
- Almost 9 in 10 Americans view life insurance as a necessity.
- Only 6 of 10 Americans surveyed said they actually own some sort of life insurance.
- Half of American households said they needed more life insurance.
Why aren’t people buying the life insurance they feel they need?
Competing financial priorities and overestimating the cost are two factors. But according to LIMRA the primary reason people do not buy life insurance is simple—indecision.1 People don’t know how much life insurance they need or what kind to buy—so they procrastinate.
Fortunately, LIMRA has identified five tips to help move your client or prospect from procrastinator to buyer.1
- Conduct a needs analysis. “Consumers who get one are considerably ‘more likely to buy’ than consumers who don’t.”
- Make a recommendation. “…producers who recommend an amount of insurance to buy ultimately sell more policies, at a 60 percent higher coverage level.”
- Meet directly with clients and prospects.“More than 7 in 10 life insurance shoppers who met with a producer face-to-face bought a policy.”
- Raise the issue. Among households who say that they are likely to buy life insurance in the next year, “…35 percent say they have not yet bought…because no one has approached them about it.”2 And, “One-quarter of life insurance shoppers consider life insurance only after a producer initiated the discussion.”1
- Be persistent with follow up. “More than one-third of (life insurance) shoppers said the producer should have followed up with them while they were still deciding whether to buy.”
To learn more about selling life insurance and sales strategies offered through Brokers Life, call us today at 866.528.7933 or visit www.BrokersLifeGroup.com.
1 “Insure Your Love.” LIMRA. N.p., n.d. Web. 24 Jan 2014. <http://www.limra.com/uploadedFiles/limracom/About/Insure-Your-Love -2013.pdf>.
2 “Facts About Life 2013.” LIMRA. LIMRA. Web. 24 Jan 2014. <http://www.limra.com/uploadedFiles/limracom/Posts/PR/LIAM/PDF/Facts-Life-2013.pdf>.
©2014 Brokers Life Marketing Group, LLC. All rights reserved.
August 13, 2013 by Pat Lanigan
We have one question in this month’s Q&A with a detailed answer provided by Sheryl Moore, President and CEO at Moore Market Intelligence and authority on indexed annuity products.
Pat: How much consideration should we put into guarantees on participation rates, loan rates, account value enhancements, ect. when there is still moving parts in other areas?
Sheryl: One must always remember that with an unbundled insurance product, such as universal life, no one product feature determines the competitiveness of a product. Sure, the cost of insurance (COI) rates might be competitive, but the premium loads may be exorbitant. On the other hand, the loan rate may be very aggressive and the per thousand charges may be prohibitive. If there is one rule that all those dealing with UL should remember, it is that “the total is greater than the sum of its parts.” Evaluate these products in whole against one another, or you may be comparing apples to oranges.
Guarantees are backed by the claims-paying ability of the issuing company.
June 20, 2013 by Pat Lanigan
We have three questions in this month’s Q&A with answers provided by Sheryl Moore, President and CEO at Moore Market Intelligence.
Pat: Let’s start with Caps, how can one company offer higher caps than another company and are they sustainable over the long haul?
Sheryl: Insurance companies are able to effectively “subsidize” their caps on IUL by making their profit through other features such as premium loads, policy fees, per thousand charges, or COIs. However, all things being equal between two different IULs, if one has substantially higher caps than the other, you do need to ask if that rate is sustainable. When the insurance companies buy the options that provide the caps/index-linked potential, it is comparable to buying a bar of soap at K-Mart versus Wal-Mart. No insurance company has some “secret source” of incredibly discounted options. Often companies that claim to have such efficiencies are merely subsidizing their first-year caps, by dropping their renewal rate caps once the policy is in force.
Pat: Assuming the viability of maintaining higher caps, will this significantly improve the policy performance over the long haul?
Sheryl: There are many things that will affect the performance of an indexed UL over a long period of time. Will the caps remain level? Will the insurance charges stay the same? How will the market perform? Generally, insurance products are priced to return 1% – 2% greater interest than fixed products. So, if traditional ULs are crediting 4.5% today, IUL issued today could earn 5.5% – 6.5% over the life of the policy. Some years, the policyholder may receive zero credited interest. Other times, they may receive double-digit gains and “cap out.” Ultimately, what is most likely to happen is somewhere in between and could average out to be 1% – 2% greater than what fixed ULs were crediting at the time of policy issue. This is regardless of crediting method, index used, or moving part used to limit the indexed interest.
Pat: How relevant are the minimum guaranteed interest rates for IUL?
Sheryl: The guaranteed minimum rates and floors on indexed life are generally not going to be very relevant. All that it takes is one solid year of gains on the contract and these minimums are a moot point.
Guarantees are backed by the claims-paying ability of the issuing company.
May 23, 2013 by Pat Lanigan
This month is a Q&A double header with answers provided by Sheryl Moore, President and CEO at Moore Market Intelligence and authority on indexed annuity products.
Pat: Does any one index crediting strategy outperform any others in the long haul? What about in volatile times like we are experiencing now?
Sheryl: No, the option seller is going to price the options (which are the instrument that provides the index-linked interest on IUL), so that his risk is relative, regardless of index, crediting method, or pricing lever used to limit the indexed interest (cap/participation rate/spread). In our pricing transaction, we take [5%] of the policyholder’s premium and use it to buy options. Today, based on interest rates, market volatility, and option costs, our option seller might tell us that our [5%] will buy an S&P 500 annual point-to-point cap of 12%. However, if the market spikes, one month from now that same 3% may afford our policyholders a cap of 17%. (After all, what is the likelihood that the index will go up 17% when it is already at a historically high level?) This is why the indices that have historically performed the best are going to have lower caps than an index that is mediocre. Sure, some crediting methods and indices will perform better than others in certain environments. However, over a long period of time, they will all perform about the same.
Pat: Over the long haul, does it really matter which IUL product I sell? (excluding riders, ect)
Sheryl: YES. When we price universal life, we price it for one of three objectives: extended no-lapse guarantee (NLG), cash accumulation, or premium-to-endow (most amount of insurance for the least amount of premium). Believe it or not, we do have IUL products that are priced for all three of these objectives; not just cash accumulation. In fact, one of the most competitive NLG products in the insurance industry is an indexed life insurance product!
Agents selling indexed life need to identify their client’s insurance needs and properly identify a product that meets the necessary product objective. From there, the agent needs to do their due diligence on the underwriting insurance company, and evaluate how they will treat their clients’ policies once the contracts are inforce. From there, the agent is positioned to compare products among their qualifying companies in terms of performance, cost, and benefits. Although it can be difficult to compare these products apples-to-apples, I suggest first comparing all of the product features independently of the indexed crediting. Then, compare caps/participation rates/spreads on like crediting methods. And above all, do NOT rely on the illustrated rate that is defaulted in the carrier’s software as an indication of which product is “best” for the client!
Check out the BLMG Q&A blog post each month for more answers to your questions! If you’d like to submit a question or share your thoughts, click on the title of this blog post and comment in the section at the bottom of that page.