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Understanding Indexed UL – Positioning Your Client For Distributions

With several of our core carriers offering their own flavor of Indexed UL today, positioning your clients in the best possible light for retirement income can be a confusing and lengthy process.

It’s a full time job knowing all the moving parts for each Indexed UL product.

Understanding how the products work and how to sell them most effectively can be a confusing and lengthy process. We have spent many hours working with clients to help them better understand the product’s crediting and accumulation strategies.
 
However, the second part of educating a client regarding Indexed UL is, understanding the moving parts during the distribution from an IUL policy.
 
What is the best way to distribute the funds from the policy?
 
Most Indexed UL policies allow for either fixed or variable loans. The fixed loans have a stated interest rate locked in from the policy issue date on the outstanding loan amount so there is no question about the cost of the loan.
 
After a number of years, (typically 15) the IUL product will often provide for a “Wash Loan” or “Zero Cost Loan” where the amount being charged on the loan is the same as the interest being credited to the cash value.
 
The more commonly illustrated policy loan distribution is the “Indexed Loan” or “Preferred Loan”.
 
Using a positive arbitrage (the illustrated interest crediting rate for cash value is higher than the interest rate being charged on outstanding policy loans) allows an illustration to reflect a gain on the outstanding loan rather than a charge. Because this can make an illustration more attractive due to the higher cash value accumulations during the distribution phase, it is what many producers prefer to show to their clients.
 
It is imperative that producers understand how these loans features work and communicate to their clients that they also have the potential for a negative arbitrage which can create considerable interest due on outstanding policy loans.
 
Depending on the client’s risk tolerance and whether they plan on paying outstanding policy loan interest as it accrues or not, either policy loan option can be appropriate.
 
Be careful!
 
If you do not have a full understanding of how the clients approach their policy loans and simply elect the variable loans due for the potential of a positive arbitrage, you may be putting the client in a difficult position later if the loan interest charged exceeds the interest crediting rate for cash value and the amount available for distribution decreases well below your clients anticipated income amount.
 
Producers selling IUL products and highlighting the ability to generate an income stream from the policy should have a thorough understanding of the loan provisions and be able to help their clients to better understand which feature is most appropriate.
 
Take the time to refer to the product guide you are illustrating to see what the variable loan interest rates are tied to. What are the Cap rates for Variable loans? What is the Fixed Loan rate and is it Participating? This can be valuable information to share with your client when illustrating Indexed UL products with Distributions.
 
For more information, contact your Life Insurance Specialist today.
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Introducing Symetra’s Cancer Care Compass 🧭 Thursday, July 25

Introducing Symetra’s Cancer Care Compass

Thursday, July 25th – 11.00 AM to 11.30 AM PST

REGISTER NOW

Symetra’s Cancer Care Compass is an industry-first rider package, available on Symetra’s market-leading indexed universal life products. It offers a unique combination of benefits and services to help guide your clients in a healthier direction for the journey ahead.

Benefits and services include a multi-cancer early detection test, health advocacy services, nutrition intervention, guidance and support, and a cash benefit. Register now to learn more!

Questions? Contact the CPS Life Team at (949) 863-0700 at Option 1.

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Calculating Retirement Needs – We Can Help You Do The Math

Retirement planning has become the first priority for many individuals. Social Security and other retirement plans may not be sufficient for the clients’ needs. Though a client may be funding a 401(k) and IRA, they still might worry that they do not have enough savings opportunities, or that they may have a potential retirement shortfall.

One of the most overlooked savings tools for retirement is life insurance.

The cash value of a life insurance policy grows on a tax-deferred basis and may provide your client with a source of additional retirement income.
 
Address potential planning opportunities in your clients’ retirement plans.
 
We can generate a detailed report unique to each client on the potential income gap between their dream income, and what they are actually going to receive in retirement.
 
A member of our team would use this information to conduct a thorough retirement check-up, and help you show your clients how life insurance can positively affect retirement years.
 
Please contact us today – we look forward to the opportunity to help you complete a retirement check-up for each of your clients.
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Rethinking The Term Insurance Strategy Can Save Clients More On Premiums

For many individuals, term insurance is an affordable way to protect their income during their working years, or to protect a financial obligation, such as a loan or mortgage.  What do these insurable interests have in common?

As time passes, the need for the insurance decreases – as policy owners have fewer years of income to replace, or as they pay down their loan or mortgage, the amount needed to pay-off the note decreases.

In other instances, a client may need to cover multiple obligations with different time horizons – attempting to do this with one policy is not the most efficient method.

There is a way to ensure your clients maintain an adequate amount of term life insurance, with a potentially lower cumulative premium outlay – laddering.
 
Multiple term policies of varying durations can be structured to provide a decreasing amount of coverage as a client moves through different stages of their life.
 
This can result in considerable cost savings, versus purchasing only one policy of the longest duration that will satisfy the total initial insurance need.
 
We can show you how to effectively ladder multiple term polices, and do a comparison of the costs versus a single policy sale. Even if you have previously sold a term policy – this is a great reason to contact clients and offer to do a review.
 
Call us today for more information.
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Help Your Client Retire On-Time Using Indexed UL

Many Americans have the goal of retiring at age 65. It’s assumed that at that age, one will have worked long enough to have sufficient assets which can provide income over the rest of your life.

If your client’s primary source of funds for retirement income is a 401(k) plan, they could be facing a harsh reality when it comes time to retire.

401(k) plans are generally exposed to market volatility and are taxable as ordinary income upon distribution. If a client’s investments are down in the years just prior to retirement, they may find themselves needing to work longer to fund their retirement while hoping that their investment allocations turnaround and provide a positive return.
 
If a 401(k) plan is only one component of your client’s diversified retirement plan, then this may not be as big of a concern. But if they are banking on that 401(k) to take care of them and their family after their working career, they may want to consider using an Indexed Universal Life policy to protect against downturns in the market.
 
Above The Match
 
For those who have a company match, it makes sense to contribute to the max that a company is willing to match. Any funds that would normally contribute to a 401(k) above the match can be directed into an Indexed UL policy. This will allow clients to protect themselves against negative returns since the product has a floor rate which ensures that they will never lose a single penny of their accumulated value.
 
With caps on the interest credited around 12% they still have substantial potential to grow their retirement fund and provide a tax free income for life. This strategy also protects loved ones in the event of a premature death. If your client were to pass away before retirement, their beneficiary would receive a tax-free lump sum death benefit from the Life Insurance policy.
 
If you have clients who are contributing to their 401(k) plan without a company match or if they are contributing funds above and beyond their company match, this concept could help them protect their accumulated account values and retire on-time.
 
Call your dedicated Life Marketing Specialist to find out how much income you can help generate for your client‘s retirement while protecting their accumulated funds from market downturns.
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Generate Premium And Solidify Your Client Relationships With This One Step

Even though the Life Insurance marketplace is ever changing, there are time tested ways to help you to generate premium while providing a valuable service to your clients.

It’s no secret that products change and new enhancements are introduced which can provide additional benefits to your clients. It should come as no surprise that as your clients move through different life stages, their needs also change.

As a result, it is imperative that as their Life Insurance agent, you are periodically reviewing your client’s existing policies to ensure that they still meet their primary objective while confirming that there isn’t a more competitive alternative product available.
 
By staying in contact with your clients and performing annual policy reviews, you are also improving your client relationship and decreasing the chances that they will begin speaking with another advisor to confirm that their plan is performing adequately and continuing to meet their specific needs.
 
A recent success story.
 
Recently, we assisted an agent in reviewing three policies that were each designed with cash value accumulation as the primary objective.
 
As the insured’s have grown older, they have become less concerned with accumulating cash value and more concerned with death benefit protection and transferring wealth to their beneficiaries. By using their current cash value and exchanging into a guaranteed policy, we are able to increase their fully guaranteed death benefit by over 35% while maintaining the same premium commitment going forward.
 
This was not a result of their current policy underperforming or being unsatisfactory in any way. It is merely a result of the client’s needs being different today than they were 15 years ago when they originated their plan. More often than not, these sales are not initiated by the client – they begin with a courtesy call from their advisor recommending a review of their current insurance policies.
 
Get started!
 
We have a Policy Review Kit which can be customized to help you begin reviewing your client’s policies.
 
If you would like assistance reviewing one of your client’s existing policies, please contact us today and we can provide you with an itemized list of what is required to get the policy review started.
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3 Concepts That Will Place More Life Cases

Life insurance is more than just a death benefit – there are numerous living benefits attached to life insurance which are available before the funeral procession ensues.

During retirement, consumer attention often shifts from income replacement and mortgage protection to concerns about outliving retirement income and health care costs.

Three common pre-retirement uses of life insurance are:
 
  1. College Expenses
  2. Supplemental Retirement Income
  3. Long-Term Care Expenses
A properly designed Indexed Universal Life (IUL) can help you win more cases by providing customers with options they can use while living.
 
Simply put – IUL’s can provide clients with access, growth and protection at any age.
  • ACCESS: Liquidity window for access to tax free cash withdrawals.
  • GROWTH: Non reportable tax-free retirement savings linked to well known indices like the S&P 500. Clients can’t lose money when the market goes down.
  • PROTECTION: Flexible death benefit provisions that policy owners can utilize for income, health care costs and ongoing care through the chronic illness rider.
Contact your Life Sales Rep today to learn how to position these game changing features of life insurance in your customer presentations.
 
We welcome the opportunity to guide you through the options of new life insurance policies and help you place more of your cases.
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CPS LIVE! Top Sales Trends to Watch 🚨 Wednesday, June 19

CPS LIVE!  Top Sales Trends to Watch

Wednesday, June 19th – 11.00 AM to 11.30 AM PST

REGISTER NOW

Staying informed about the latest trends in the insurance industry is essential for professionals to thrive in this ever-changing landscape.  By embracing technology, meeting customer expectations, addressing regulatory changes, and navigating economic uncertainty, insurance advisors can position themselves for success.

Tune in as our Sales & Marketing Managers delve into the latest trends shaping the insurance sales industry. Register now!

Questions?  Contact our Sales Teams at (949) 863-0700.  Life Insurance – Option 1 / Annuities – Option 2 / LTC – Option 3 / DI – Option 4.

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How Policy Loans Affect Your Whole Life Dividends

Whole Life Policies have been around for decades and are considered to be the most conservative type of Permanent Insurance that you can buy.
 
And since more clients are searching for low risk, conservative insurance products with stable returns, Whole Life sales have been on the rise and producers are positioning these plans as a way to deliver their clients tax-favored income.

As a producer, it is your responsibility to educate your client about how the withdrawals and policy loans can affect their policy.

Whole Life providers using direct recognition when taking policy loans.
 
Simply put, direct recognition refers to the carrier crediting a different dividend rate to the outstanding policy loan than they do to the non-loaned portion of the policy. This is important, especially in short pay schedules where the policy will rely on dividend performance and internal cash value to sustain the policy performance long-term.
 
If the dividend performance falls short of the anticipated schedule because of a considerable policy loan and the policy is not being reviewed on a regular basis, the client runs the risk of lapsing the plan and receiving a tax bill for any gains in the outstanding policy loan.
 
While direct recognition is not reason enough to sell away from Whole Life, it’s important to understand this aspect of the policy. Remember that maintaining contact with your client post-sale and periodically reviewing their plan to ensure the policy is in good standing and will not lapse unexpectedly is key.
 
Our Sales Team can help you to better understand the different loan options available and determine whether direct recognition will be applied to the Whole Life policy in question.
 
If you have sold a Whole Life policy where the client will likely take income out of the plan, call us today and we can help you to better understand how the loan will affect the dividend crediting and also the long-term policy performance.
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Join us for Happy Hour 🍻 Thursday, June 20

You’re Invited… Join us for Happy Hour!

Left Coast Brewing Co | 6652 Irvine Center Dr, Irvine CA 92618
Thursday, June 20th – 5.00 PM to 7.00 PM

RESERVE A SEAT

Connect with the life sales experts from CPS and other producers just like you.  Stop by anytime between 5.00 PM & 7.00 PM to enjoy some drinks on us!

Questions?  Contact the CPS Life Team at (949) 863-0700 Option 1.

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