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The Price is NOT Right | More Regulations

Life insurance is being repriced due to new regulations
Certain life insurance products will be repriced or discontinued this year due to new life expectancy tables and reserve requirements.  Some insurers don’t want to contend with too much risk so they are redesigning certain products with shorter guarantees which will put more risk on the client in the long run.  If your client’s are looking for a fully guaranteed product you may want to move fast before prices increase or guarantees are shortened.  Launch the following link for details:  2017 CSO & PBR.
Deja spew again!
A few years back the NAIC created illustration regulations to limit the “too good to be true” projections of the indexed universal life world.  It appears they did not foresee how insurers would react and carriers are once again showing their creative side. The initial guidelines limited the historical return look back rules and the amount of loan arbitrage spread you could show.  This toned down the high projected interest rates and the amount of leverage you can reflect in an illustration.   
Today, some insurers have created “interest bonuses” and “return multipliers” to make their illustrations ‘prettier’ than their competition.  Return multipliers now allow a client to elect “higher expenses” in order to profit on these “potentially higher returns”.  The bottom line is . . . be cautious of what is being shown and question how realistic the numbers are. Certainly, the excitement level increases with these new features but so does the risk that the plan will perform as projected.
When we look at an analysis of different carriers you find a large variance in the “projected numbers”.  Below is an example of the huge difference in projected distributions with just one carrier.
Projected income at age 65-85 based on max funding for 25 years:

  • Max distributions using loans and current illustrated rate – $190,000  
  • Max distributions using surrender to basis then loan – $130,000
  • Max distributions using surrender basis/loan and a 1% lower return – $80,000

For those who want to dazzle and likely disappoint their clients later they can show the product in its best potential.  A client needs to deal with premium payment risk, performance risk and mortality risk. Today most carriers want you to focus on the engine and rarely talk about the chassis. Universal life policies project current and guaranteed cost of insurance rates. The carrier can increase future mortality expenses.  The above numbers just reflect performance changes, if there was an increase to cost of insurance the numbers will be even lower. 

Launch the following link for an example of how these multipliers work:  Indexed UL Multipliers

NEW!  Client Chronicles™

I have been asked by many advisors to share case studies to help them better understand the use and value of insurance,and the role it can play in planning.  Client Chronicles™ focuses on real life situations faced by advisors and their clients. 

Our first Chronicle highlights the differences between group and individual insurance in addition to reinforcing the value of performing an insurance review with your clients. 

It amazes me how long it can be before a client reviews their life insurance.  In a recent case, a couple had purchased several policies over the years but never really had a formal review of what they had.  We were able to consolidate their coverage, give them substantially more insurance for a longer duration of time, at a lower price!  Launch the below link to learn more . . .

Client Chronicles™- Group v. Individual Life – The Value a Review

Our Integrated Insights™- Group v. Individual Term provides a more in depth comparison of group v. individual term.  The longer your client will hold coverage and the healthier they are, the more they should have individual term.  Group coverage requires the healthy to subsidize the unhealthy. 

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