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Three Concerns. One Solution.

Protect Your Clients Today & Tomorrow
 
Life insurance is certainly a topic that can stir discussion and debate.  It is a conversation that deserves distinction from all other insurance because death is eminent for all of us.  Planners take a long view on retirement savings and income planning; but many unfortunately take a short view on life insurance.  The value of life insurance has been enhanced by the living benefits many insurers now offer.  These plans can be a versatile safety net to protect your clients today and tomorrow. 
 
Three Major Client Concerns
 
I find there are three major concerns most clients have when looking towards the future:

  1. Dying too soon
  2. Living too long/ Outlining their savings
  3. Getting chronically sick along the way

One Solution
 
Did you know there is a life insurance plan that addresses all three concerns?  It is a permanent life insurance policy with riders that allow a client to draw from the death benefit (NOT THE CASH VALUE) if they need chronic care or an income.  Now we can protect a client over their entire lifetime with one policy.
 
How it Works
 
A 40-year-old male purchases a $500,000 permanent life insurance policy designed to be paid up by age 65. 

  • If he dies, $500,000 is paid to his beneficiary. 
  • If he needs care, he could receive up to $20,000/month tax-free until his death benefit is exhausted.
  • If he needs extra income later in life, he can receive up to $50,000 for 10 years or a lower amount for longer until the death benefit is paid out.  If he takes the $50,000 for 10 years his yield at 95 would be over 3%.  If income is taken prior to age 85 there will be some discounting.  Any income from the death benefit above basis is likely taxable. 
  • All numbers are guaranteed; the total client outlay over 25 years is approximately 1/3 of the death benefit. 

Think of how a protection tool like this can enhance a clients’ retirement and flexibility.  Yes, they will have lower invested assets, but they now have this safety net. 

  • If someone dies early in retirement, the death benefit can replace social security or other income.
  • If they get sick and need care, they wouldn’t have to worry about drawing from their qualified money or home equity. 
  • If their savings and income are in good shape, they can leave the death benefit to heirs.  Or they might decide to make a tax play to leave their qualified money to a charity, letting the heirs inherit the tax-free death benefit.
  • If later in life their income and savings are lower than anticipated, perhaps they start drawing the death benefit as income. 

Of course, the above is not appropriate for every client.  Risk tolerance tests are conducted on a clients’ investment risk.  Why not consider checking their “life” risk level and recommend a vehicle like this to add safety and flexibility to their plan?  Low-net-worth clients might need the safety net to avoid devastation.  Mid-net-worth clients might use it best for increasing their odds of success and increased liquidity while high-net-worth clients are likely to use it as a tax/leverage/liquidity play.  A plan like this does take away from their total savings pile.  However, the money doesn’t disappear, it is in a bucket they will use some day.  This would be a long play on the only outcome that life guarantees. 

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The information contained on this website is provided "as is" and does not constitute legal, accounting or tax advice. We are not acting as your attorney, accountant or tax professional. We encourage you to contact the appropriate professional for legal and tax information pertaining to your specific needs and circumstances.
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