4 Ways Clients Can Cash Out On Their Life Insurance

Your clients need guaranteed life insurance protection today – but life changes, and so can your clients’ life insurance needs.

A unique feature on guaranteed universal life is a return of premium option, included at no additional charge within the policy, which provides clients with an exit strategy, giving them flexibility for their future.

How does this rider work?

Clients purchase a guaranteed universal life policy and make the required premium payments – the required premium is the amount that guarantees the death benefit through age 100.  On the 15th, 20th and 25th policy anniversary, clients have a 60-day window where they have the opportunity to surrender their policy and get their premiums returned to them.  If they don’t exercise the rider, there will be no impact on the policy.

4 Cash Benefits For Your Life Insurance Clients
  • For Retirement.  A 45-year-old insured receives 20 years of death benefit protection and at age 65 receives her paid premiums back and uses the cash to supplement retirement income.
  • For College Costs.  The insured bought two permanent policies and currently has young children.  One of the policies was a GUL policy with the refund option available.  When the children are at the age to attend college, the death benefit needs of the family change. He can surrender his GUL policy in year 15, 20 or 25 and use the cash to help pay for the child’s college education.
  • For Business Planning.  The insured owns her own business and has a key employee, Tom.  She purchases a GUL policy to protect her business if Tom died unexpectedly.  In year 18 of 20, Tom resigns – and two years later she will receive all of her premium payments back.
  • To Pay-Up Another Policy.  A 55 year old has a need for $5M in life insurance.  He purchases two GUL policies, one for $2M and another for $3M.  When he turns 75, he no longer needs as much coverage.  He surrenders the $2M policy and uses the cash value to pay up the remaining policy.  The insured still has $3M of insurance with no further premiums due.

Contact your Life Sales Rep for more on how the return of premium option can positively impact your clients and your business.

3 Out Of 4 Clients Want Help Preparing For Retirement – Do They Know How You Can Help?

Clients often think of life insurance solely as an instrument to protect them in the event of premature death, unaware of the valuable tax benefits that are afforded through cash value life insurance.  And in today’s volatile marketplace, clients that are saving to retire need all the help they can get.

You have access to many products that can provide your clients with tax favored cash accumulation and if structured properly, will also provide for non-reportable, tax-free income.

The ability to specify a premium schedule is one of the great features available in our cash value life insurance products, removing the objection that the policy costs too much money.  By educating your clients about the benefits of cash value life insurance as a long-term savings vehicle, they are likely to fund the policy with as much premium as they can reasonably afford.

While term insurance may be efficient for replacing income, or indemnifying debts, clients are very likely to outlive their level benefit period – receiving no return on their premium contributions.

How You Can Help

Recommending a cash value insurance policy at a younger age and more favorable health will better prepare your clients to address critical financial concerns such as retirement income planning, college tuition funding for loved ones and also paying for unexpected events (medical emergencies, litigation, home renovations, etc.) in their family.

The longer that you can fund a policy and allow the cash value account to compound interest and grow, the larger the potential income stream will be.  One of the unique features of using life insurance is the death benefit – if the insured dies prior to accessing their cash values, it will provide a tax-free return on the premiums paid to date.

Many of your clients want to have a conversation about their options in regards to preparing themselves for retirement, but feel overwhelmed by the thought or do not know where to start.  If you haven’t shared how cash value life insurance can play an integral role in their long-term financial planning strategy, you are likely missing out on easy sales; leaving the door open for another broker to have that conversation with them instead.

Your Life Sales Rep can provide you with an understanding of the different products available for cash accumulation.  We can provide you with customized solutions for each client.  Whether they can spend $100/month, $1,000/month or $10,000/month, we can create a solution that fits their budget.

Contact us today to learn how you can begin to position cash value life insurance as a core product offering to all of your clients.

Sequence Of Investment Returns

Most retirees would be pumped to earn a 10% average annual return during their retirement years – but averages can be misleading during the distribution phase.

In the world of investment returns, the results of one year are related to the results of the next, because both are being compounded on a dollar amount that grows or decreases in year 1 before being compounded again by the return in year 2 and so on.  As a result, a simple average arithmetic return fails to capture the compounding effects that occur from a sequence of investment returns, especially when withdrawals are taking place.

It can often be the sequence of returns that will result in investment success or failure in retirement.

Let’s take a look at two hypothetical portfolios:
  • Each has an initial investment of $500,000
  • Portfolio 1 illustrates real S&P 500 returns from 1969 to 1994
  • Portfolio 2 reverses the order of the S&P 500 returns
  • $30,000 annual withdrawals beginning in year 1 adjusted 3% each year for inflation

Portfolio 1

Summary

Portfolio 2

10.1%

Average Annual Return

10.1%

$1,156,591

Total Income

$1,156,591

$19,369

Ending Account Balance

$2,555,498

With portfolio 1, the market delivers negative returns during the early years of distributions and the reverse is true with portfolio 2.  A period of market losses that occurs when a person is transitioning into retirement may have a devastating impact on the income potential of the investment portfolio.

We do not have control over the markets, but we do have control of where the distributions are pulled.  Having another “pool of assets” not correlated to the stock market can help limit the sequence of returns risk to your investment portfolio.  Under this approach, the retiree will avoid taking distributions from the investment account in those years that follow a negative return.  By avoiding distributions in these years, the impact of the negative market returns would be far less.

A cash value whole life insurance policy can be a great alternative approach that provides guaranteed tax-deferred growth and tax-free income of the cash value via partial surrenders and policy loans.  In addition, the income tax-fee death benefit can protect your income during your working years, ensuring your legacy to your family.

A healthy 35-year-old female purchases a whole life insurance policy that is structured with only twenty years of payment at $500 a month.

Age

Projected Cash Value

Projected Death Benefit

70

$361,706

$652,052

75

$469,809

$750,158

80

$602,030

$861,519

Contact your Life Insurance Specialist for details!

One Life Insurance Plan – Numerous Benefits

Life Insurance is one of the most valuable assets there is – especially when you consider the numerous benefits that a permanent life policy can provide now, while still securing a financial future for loved ones down the line.

Successful individuals between the ages of 30 and 50 with young families will find that permanent Life Insurance is an ideal asset.

If properly structured, permanent Life Insurance can produce:
  • Tax free death benefit to loved ones
  • Tax deferred cash accumulation and income
  • Tax free benefits to pay for long term care expenses
On top of all these benefits, permanent Life Insurance also offers:
  • Flexible payments
  • No required minimum distributions
  • The opportunity to earn premium discounts and rewards – for clients who engage in John Hancock’s innovative Vitality Program

Do you know which clients you should be marketing permanent life insurance to?  Look for clients that seek out value – not just the lowest price on a spreadsheet.  Talk to individuals who are open to new concepts and would be interested in one plan that will address their multiple needs.

Contact your Life Sales Rep to learn more regarding what benefits you could be offering using Life Insurance and a few hundred dollars per month.

Tis The Season Of Giving

On a classic episode of the prank show Candid Camera, people on an elevator watched in confusion as other occupants stood with their backs to the door – and despite their better judgement did the same without question. Why? Humans are social animals and tend to follow the herd.

While some insurance carriers seek to exploit the pressure people feel to conform, others are attempting to change the norm.

Symetra allows clients to nominate a charity when they purchase a policy – a benefit available at no additional cost

This rider provides the qualified charity of your client’s choice a gift equal to 1% of the paid death benefit.  It allows individuals to be proud of, and identify with, a recognized charity – a humblebrag likely to make its way in conversations with friends and family.

With an insurance age of 34 and at top health rates, a $500 monthly premium can guarantee a $1,375,624 death benefit – which would come to a sizable donation of $13,756 to the charitable entity.

And with the holiday season just around the corner, giving is probably already on your clients’ minds.  Counting blessings has a tendency to stroke one’s charitable nature – and what better than giving back. Be sure to discuss this charitable gift rider with your clients this holiday season!

Contact your Life Insurance Specialist for details – and Happy Holidays!