Never overestimate what consumers know about life insurance.
- 66 percent of consumers are unsure or don’t believe benefits paid from life insurance are not taxable.
- 51 percent are unsure or don’t believe cash value from permanent life insurance can be used to help fund college educations, supplement retirement income or meet other financial needs.
- 85 percent said that a source of tax-fee income in retirement is what they find most valuable in a financial product.
This according to the 2018 Life Insurance Needs survey from Allianz.
Bridging the education gap about life insurance is a “tremendous opportunity” for agents and financial advisors, said Jason Wellmann, senior vice president of Life Insurance Sales for Allianz.
Particularly for advisors beginning to embrace holistic planning models that address the entirety of a client’s financial affairs, the role of permanent life should never be underestimated.
“Too many Americans with significant retirement assets are not optimizing their financial strategy because they simply don’t know all of their options,” Wellmann said.
A Question of Positioning
By offering a death benefit and cash value, permanent life insurance kills two birds with one stone, said insurance industry veteran Mark Teitelbaum.
Allowed to grow, that cash value blossoms into a significant asset with advantages many people don’t know about, said Teitelbaum, vice president of Advanced Markets for Axa.
“We talk about permanent life insurance as a smart addition to a financial plan, how to minimize taxes and build assets over time,” Teitelbaum said.
Policyholders can withdraw the earnings from the cash value tax free and to take loans against the cash value, in effect paying interest to policyholders themselves, he said.
Permanent life insurance policies can also help owners adjust tax brackets depending on how they choose to take dividends and interest, he said.
Permanent life insurance policies can accelerate the death benefit through the addition of long-term care or critical illness riders.
Compared with term life, permanent life offers more value and flexibility.
“Term is for when you die, permanent is for when you are alive,” said Teitelbaum.
Other Survey Findings
The Allianz survey also revealed that:
- 88 percent of respondents understand the death benefit component of permanent life insurance.
- 75 percent of people who work with a financial professional are discussing sources of tax-free retirement income with the professional.
- 70 percent of respondents are discussing ways to fund their child’s college education.
- 52 percent talk about financial products that offer low or no interest loans against the policy’s cash value.
- Fewer than half of respondents with a financial professional have permanent life insurance and 25 percent don’t currently have it, but would like to learn more about it.
- Nearly 95 percent of respondents said the ability to save enough to retire comfortably was a top priority when planning for the financial future.
InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected]
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