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Question: In what markets do you see the U.S. life insurance business growing in the next two years?
“I see three growth markets. The first is estate planning. There has been a recent resurgence in the use of life insurance to cover estate taxes. This is happening in states that have very low exemption amounts in comparison to the $5 million-plus exemption amount in the federal estate tax. For instance, in New Jersey, the estate tax starts at $675,000. In addition, there is no portability in New Jersey even though there is portability in the federal estate tax law. When people learn about this, that helps sell life insurance. The second growth market is use of life insurance as an asset class. I started doing this last year, and it has helped sell survivorship polices. We use whole life insurance to replace some of the bonds in the client’s portfolio, to lower the interest rate risk. The third area is using life insurance to create tax-free supplemental retirement income for people in the highest tax brackets who must now pay increased taxes due to the new Medicare surcharge. We use variable universal life or whole life (depending on client risk tolerance) insurance to provide these clients with a source of supplemental tax-free income. In all three cases, the clients do not know about the solutions until we teach them. Once they learn, the referrals to our firm are easier to get.”
—Mark D. Olson, CFP, MSFS, Horizon Wealth Strategies, Edison, N.J.
“It’s the senior market, absolutely. For instance, I am using life insurance for income replacement and pension maximization. People never outgrow the need for life insurance. My average client is age 60 to 62, and we make life insurance part of the estate plan. The key is to get to the clients before they decide how they will set up their pension. Those who don’t know about other options might commit to a plan that will pay the spouse half of the retiree’s pension if the retiree dies first. They have to pay extra for that. I point out how using permanent life insurance to maximize the income will provide many more advantages. For instance, they can take the money they would otherwise pay for the spousal pension amount and use it to buy a life policy with the spouse as beneficiary. Then, if the insured (pensioner) dies first, the policy benefit goes to the spouse tax free; because of that, they typically won’t have to spend as much money for the same amount of spousal income. There are other benefits too. The catch is, the person needs to be able to qualify for the life insurance. After we look at the pros and cons, clients often decide to do the pension maximization. In the last 1.5 to two years, for example, my pension maximization business has grown 15 percent. Last year alone, my life production was up 30 percent, and pension maximization was a good part of it. I think this trend will continue.”
—Terry Armstrong, FIC, LUTCF, Modern Woodmen Fraternal Financial, Pensacola, Fla.
“The companies will adapt their products to be versatile. For instance, life policies can address disability, long-term care and critical illness protection through riders. The market potential for this has never been greater, because people are seeing that life insurance with riders for long-term care and critical illness can help the family and insured deal with devastating circumstances and re-engage with life — while the insured is still alive. Clients are anxious to buy solutions to life’s hazards, and they are buying the riders. In my practice, 90 percent of the permanent insurance I sell includes these riders, and my percent of permanent insurance to term insurance sales is up 10 times from about five years ago. The industry is not yet offering disability riders, but insureds can use the long-term care riders in such a way as to meet the disability need. It won’t pay for all the things a disability policy will cover, but the point is, the person could qualify for benefits in some disability-related situations.”
—Steven M. Daniel, CLU, ChFC, Daniel Financial Services, Butte, Mont.