By Steve Sanders
Most life insurance professionals look beyond the life insurance industry for major trends that may impact our clients and our businesses. Policies at the federal level ranging from new health care laws to tax reform to budget challenges will have a major impact on our businesses in the coming years. At a minimum, they will certainly have an impact on the minds of consumers, how they seek financial advice, and what types of solutions they seek to overcome their challenges and meet their goals. With all of these forces swirling, the consumer’s mind is undoubtedly cluttered with concerns surrounding four major challenges:
The Health Care Challenge. Finding and maintaining affordable health insurance coverage has been a challenge for many Americans in the past. Although the introduction of the Affordable Care Act (ACA) was designed to solve this challenge, the troubled rollout of the ACA website combined with loss of access to existing health insurance plans for some and the continued federal debate over the law itself have left many confused. The challenge for consumers going forward will be to find answers to key questions surrounding total cost, availability of plans and inclusion of doctors in the plan.
The Retirement Challenge. For years, the decline in the number of corporate pension plans and future uncertainty surrounding Social Security have pushed more and more of the retirement planning process on to the individual. The economic crisis of 2008 and its impact on personal net worth have further compounded the challenge. In addition, many retirees today are facing questions around the “de-accumulation” phase and how to spend down assets effectively. Although this is not a new challenge, like the health care challenge it is taking on new importance for many individuals.
The Longevity Challenge. Advances in health care have improved lives for millions of Americans. However, living longer, healthier and more active lives does come with one specific challenge – how to maintain enough income to support your lifestyle. With increased longevity comes the very real challenge of increasing assets and income enough to pay for activities and health care needs during extended golden years.
The Tax Challenge. Federal deficits, polarized bipartisan politics and recent tax legislation have left many feeling over-taxed and expecting further tax increases in the future. The question for many consumers is how to navigate the uncertain tax future and how to maximize their income in lieu of increasing tax burdens.
Good News for the Life Insurance Industry
The great news for us is that we work in an industry and we provide a product – life insurance – that is uniquely positioned to help consumers meet many of these challenges. The core value of life insurance – providing much-needed death benefit protection to surviving dependents – hasn’t changed and will continue to be the product’s primary benefit. But the industry has recognized these challenges faced by consumers and has adapted product features and designs to meet these needs. Consider the following:
- Through cash value life insurance, the policyholder can generate tax-free income from the policy in the form of withdrawals and loans providing a much-needed supplemental source of retirement income.
- Life insurance is the most efficient wealth transfer vehicle available as the death benefit passes to the beneficiary income tax-free and if structured properly, estate tax-free.
- New designs in living benefits riders allow policyholders to access a portion of the death benefit to help pay for qualifying terminal, chronic and specific medical conditions.
- Deferred and immediate annuities are still the only vehicle available on the market that can create a guaranteed income stream for the life of the policyholder.
We see an opportunity to promote the value of life insurance and why it is uniquely positioned to help meet many of the challenges consumers face today. Regarding the health care challenge, the accelerated benefits for chronic, terminal and other medical conditions continue to be a valuable benefit included on life insurance products. To help meet the retirement challenge, strong cash accumulation products provide potential for supplemental income in the future. For the longevity challenge, consumers can look to a fixed annuity products portfolio with competitive features like return of premium guarantees and liquidity features. Finally, most life and annuity products can help with the tax challenge, including providing tax-deferred growth in annuities, and tax-free income through loans and withdrawals in the life products.
The current industry environment reminds us of Mark Twain’s quote, “Rumors of my demise have been greatly exaggerated.” Although we read today that life insurance ownership is at all-time lows, it is our belief that there has never been a better time for life insurance. The challenges faced by today’s consumers are real and life insurance is uniquely positioned to help them deal with those challenges. As life insurance carriers and financial professionals, we can provide valuable product features designed to meet the needs of clients and help them reach their financial goals and dreams.
Steve Sanders, LLIF, is senior vice president and chief marketing officer, Columbus Life. Steve may be contacted at [email protected].