Non-Reportable, Tax-Free Income During Retirement By Using Index UL

There aren’t many investment vehicles available that offer the tax advantages of properly structured, permanent life insurance.  Unfortunately, many clients are not aware of those benefits when purchasing term insurance, and they may not know about alternative product solutions.

Within your existing book of clients, do you have any individuals who are hitting the contribution limits in their qualified plans?

If so, Index Universal Life (UL) may be a great concept to introduce to them in your next meeting, as it can provide a number of benefits that are comparable to a qualified plan.

The following series of questions can be used to frame the benefits of Index UL, without specifically introducing the concept of life insurance
  • Do you believe that taxes will be static, or fluctuate over your lifetime?
  • Are you contributing to any qualified retirement plans? If so, are you funding to the maximum limits of those plans?
  • Would you be willing to trade the benefits of interest crediting in order to remove the risk of losing accumulated values, due to downturns in the market?
  • Do you mind paying taxes on income that you receive from your non-qualified assets?

Many of your clients will meet the contribution limits in their qualified plans; believe taxes are only going to increase; will not like exposure to loss of accumulated values due to downturns in the market, and will not like paying taxes on their distributions.

All you need to do next is ask them is how much they would like to contribute monthly for a vehicle that has
  • No contribution limits
  • No downside market risk
  • Compound interest crediting in the 10-12% range annually, without the possibility of losing their accounts’ value due to negative returns in the market
  • Non-reportable, tax-free distributions of their accounts’ accumulated value

Once your clients provide you with a premium commitment, we will help you to assess their insurability, and prepare proposals that solve for a minimum death benefit and provide the most efficient cash value accumulation.

Ideally, Index UL policies should be funded for 10-15 years prior to taking policy distributions, but they can be customized to meet many different specifications depending on your clients’ age and preferred premium schedule.

This strategy is not limited to clients who are maximizing their qualified plan contributions

Index UL can be an efficient solution for younger clients (ages 30-50) who are looking to further fund their retirement, prepare for a child or grandchild’s school tuition costs, or contribute discretionary income into a product with the tax favored features mentioned above.

We will help you identify clients within your existing database who would be good prospects for this strategy, and will create customized solutions to meet their needs.  To learn more about the Index UL products that are now available, and to explore how they can drive new sales opportunities – call your Life Sales Rep today.

How To Lower Your Client’s Premium – Every Time

What if you could offer your client the lowest premium on any Term or UL policy every time?

For years, Life Insurance carriers haven’t given their clients the option to offer the death benefit proceeds to be paid in any way but a lump sum.  However, with new product advancements a few carriers now offer a flexible death benefit payment option than can provide an income stream for the beneficiaries, while significantly lowering the premium for the insured.

The Income Provider Option from a few of our selected carriers allows the policy owner to select a guaranteed annual or monthly income stream death benefit for payment to one or more beneficiaries.

How it works:

Not only will this Income Provider Option allow the policy owner to control how the benefits will be paid, it also decreases current cost of the insurance by providing graded premium discounts based on how long the income stream pays out.  This endorsement is an extremely innovative and cost effective way to hedge against adverse underwriting or premiums above your client’s tolerance to get them the coverage they really need.

The Income Provider Option also presents the client with a great deal of flexibility granting them the ability to directly specify how the payments will be made to the beneficiary.  Payments can be structured so that a surviving spouse receives a payment from the policy every wedding anniversary, or a grandchild receives a sizable birthday gift from a grandparent for a designated amount of years.  This payment option can provide a lasting legacy and address the personal and sentimental value of the Life Insurance policy by ensuring the death benefit is paid the way the insured intended.

The Income Provider Option provides your client with two immediate benefits; first, it will give them peace of mind knowing their family will be cared for the way they intended, and second it will help lower current premiums, leaving them more discretionary income while they are still alive.

If you have a client in mind or would like to learn more about this great endorsement, please contact your dedicated Life Sales Associate.

Life Insurance With Affordable Long-Term Care

It is a common belief amongst today’s consumers that Long-Term Care Insurance is too expensive.  In addition, they also worry about paying for a product that they may not even need, or end up using.

Thankfully, the Long-Term Care market has drastically changed over the last decade – now many companies offer new products that address and overcome common objections.

Consider coupling a Permanent Life Insurance Policy with a Long-Term Care Rider to affordably cover all your clients needs.

Take this case for example:

Male, age 45, in good health, can purchase a $300,000 universal life policy for family income replacement for $182 per month.  For an additional $15 per month this individual can add a long-term care rider that can accelerate the $300,000 death benefit at 2% per month ($6,000) while living to pay for qualified long-term care expenses.

Now the client has addressed several needs with one policy – he has life insurance to protect and provide for his family and the ability to use the death benefit while living for long-term care expenses should the need arise.  All of this gives him the added piece of mind knowing that a benefit will be provided while living or at death as long as the policy is kept in-force.

For more information about life insurance with living benefits for long-term care contact your Life Sales & Marketing Manager.

Biden Tax Proposals And Where Life Insurance Fits

A phrase from the famous philosopher named Heraclitus of Ephesus around the year 500 BC. Nothing in life is permanent, nor can it be, because the very nature of existence is change.”

It’s with this phrase in-mind that we discuss the possible tax changes that may lie ahead; eliminating the step-up in basis, increasing capital gains, and/or reducing of the estate tax exclusion.

Under current law, assets that pass directly to heirs benefit from a step-up in basis.  This means the heir receives the asset valued as of the date of death.  If the heir sells this holding right away, they pay little to no capital gains taxes.

Biden’s proposal would tax an asset’s unrealized appreciation at transfer, referred to as eliminating the step-up in basis.

In addition, the proposal is also set to increase the capital gains tax rate from 23.8 percent to 39.6 percent for high income earners.  When including the net investment income tax, the top federal rate on capital gains would be 43.4 percent.  What would have previously been a tax-free transfer at death is now not only proposed to be taxable, but at a higher rate!

There’s More

Combine that with a reduced estate tax exclusion and it could be a triple-whammy. Currently this exemption is $11.7 million per individual and $23.4 million per couple.  Biden’s proposal is to drop that limit to $3.5 million per individual, in which an amount of the estate above the limit would be taxed at a 40% rate.  To put that in perspective, an estate of $5 million (currently under the $11.7 million limit) would be taxable for amounts over $3.5 million at a 40% rate.

Each one of the proposals, on their own merits, has curious implications.  But the picture looks dramatically different if all three were to happen.

Going forward, the biggest opportunity to avoid tax is the exception within life insurance, as the proceeds are not includible in the recipient’s gross income.  People will need to start rethinking the way they manage their investments, and their estate plans and life insurance will take center stage for those who want a tax-friendly way to pass on wealth.  When structured appropriately it will provide liquidity needed to pay for any taxes at death.

Please call one of our life insurance experts to discuss in greater detail, we are here to help!

Are You Following Up on Your Term Sales?

Term Insurance is often sold to clients who simply want the lowest cost death benefit protection for a specified period of time.  Clients and producers alike will preach the concept of buying Term and investing the savings.

While we’d like to think that clients and the investors hold themselves accountable for this strategy and do invest their cost savings, we know it is more likely that the clients pay for the Term coverage and then spend their savings elsewhere.  The Term Insurance is then forgotten over time only to be revisited once the level Term period has expired and the client does not want to pay the escalated premium.

One way to help your clients effectively plan for their long-term needs is to discuss the Term Conversion option.

Consider this:

By completing a conversion application, the client can change their coverage from a Term plan to a Permanent policy without any additional underwriting.  This is usually allowed up to a certain age (commonly 65, 70 or 75 depending on the provider).  The cost of these conversions is based on the insured’s attained age at the time of the request so the longer your client waits to exercise their conversion option, the more expensive the premium will be.

This should be a topic that you address with your clients on a regular basis to ensure that you do not let the conversion privilege expire and also that you are converting at the earliest, most appropriate time which can save your clients significant premium costs.  It will also ensure that your clients have the coverage in place when they need it most – when they pass away.  Since the average life expectancy is in the mid-80s, more often than not, the level Term policy will expire before your client expires.

Ask yourself if you have a process in place to address your clients who have purchased Term Insurance.  Even if converting their Term plan isn’t the most appropriate course of action at this time, the review discussion may uncover additional needs for insurance or lead to referrals.

We can help you determine if your client’s Term plan has a conversion option and provide you the marketing support needed to turn these cases into permanent sales.

If you have any clients that may be approaching their conversion deadlines or who may be appropriate prospects for a policy review, call us today and we can help get the process started for you.