Advisor Today - September/October 2012 - (Page 28)
| By Josh Durand
From Term to Perm
Enhance the ﬁnancial well-being of your clients by offering them permanent life insurance options.
ccording to LIMRA, term life insurance accounts for 65 percent of coverage and represents nearly 40 percent of all new individual life policies issued in the U.S. With such popularity, term clearly offers many appealing attributes to those in need of a guaranteed death beneﬁt for a speciﬁed period. With an affordable premium that remains the same over the life of the policy, term offers the insured a simple product that provides beneﬁciaries with income replacement to cover ﬁnancial obligations, such as mortgages or college tuition, should death occur. This is often why term is the consumer’s “gateway” product into the world of life insurance, especially in a time of low interest rates and high stock market volatility, which can make some clients uneasy. While term can be a ﬁt for almost any age group, it’s a safe assumption that a client’s ﬁnancial-planning needs will change over time, requiring life insurance products that deliver features and ﬂexibility beyond those available with term. The good news is that almost all term policies offer the option to convert to permanent products. The bad news is that most clients don’t realize this, and view term as a “use it or lose it” product, making it important for advisors to educate their clients about the conversion opportunities available. They should also ensure that the term products they offer are convertible to a full suite of permanent products in order to facilitate “needs-based” selling that aligns with a client’s evolving ﬁnancial strategy. Converting term to perm As a client looks to transition to permanent products, he may wish
28 ADVISOR TODAY | September/October 2012
While term insurance can be a ﬁt for almost any age group, a client’s ﬁnancial-planning needs will change over time.
to retain a death beneﬁt to protect his family’s well-being, while also growing cash-value that can serve as a source of tax-advantaged supplemental income. In these instances, variable universal life products may present a strong option. VUL offers a tax-efﬁcient death beneﬁt where the cash value varies with performance of an underlying portfolio of investments. These products may be appropriate for clients with a high risk tolerance and longterm ﬁnancial needs, such as estate planning, business continuity, supplemental retirement income or a child’s college tuition. For the more conservative client with the same objectives, indexed universal life may be a better alternative. IUL offers the potential to capture some of the equity market upside, but with downside protection, subject to caps and spreads. IUL products represent one of the fastest growing segments of the life insurance industry, with nearly $1 billion in sales in 2011, up from $100 million in 2001¹. These products are leading the shift in the industry to cash-value life insurance products. For the consumer wishing to transition to permanent life insurance that is not inﬂuenced by market ﬂuctuations, guaranteed universal life products should be considered. For insureds who continue to have the need for a cost-efﬁcient death beneﬁt, these products offer a tax-efﬁcient solution that’s typically guaranteed for life. While it’s impossible to predict what will happen over an insured’s life, it’s a safe assumption that his ﬁnancial view of the world will change over time. Regardless of the trigger for changing ﬁnancial needs— whether it’s the birth of a child or estate matters, advisors who can provide a broad spectrum of permanent life insurance options to those needing to convert from term have the opportunity to offer true value to their clients’ ﬁnancial well-being. ■
Josh Durand is vice president, life insurance business leader, for Lincoln Financial Group. He is responsible for driving growth of Lincoln’s Individual Life Insurance business, and product promotion and positioning. He has more than 16 years of experience working with life insurance products.
1 AnnuitySpecs.com’s Indexed Sales & Market Report, March 2012.
Table of Contents for the Digital Edition of Advisor Today - September/October 2012
From The Editor
Making the Transition
Will We Avoid the Fiscal Cliff at the End of 2012?
Boosting Retirement Plan Participation
Protecting Younger Workers’ Greatest Asset
From Term to Perm
Demystifying Life Insurance
Four Under Forty
My Best Sales Ideas
NAIFA Government Relations
Insuring People in the World of Sports
Advisor Today - September/October 2012