Leveraging LIAM

As September rolls in, we find ourselves at the threshold of Life Insurance Awareness Month, a time dedicated to reinforcing the critical role life insurance plays in the financial stability and well-being of families across the nation. This is an opportunity for insurance agents and financial advisors to deepen clients’ understanding of life insurance, and to highlight the innovative solutions that can help them achieve their financial goals.

In recent years, indexed universal life insurance and other indexed products have gained significant traction. Their success is a testament to their versatility and the unique benefits they offer. Because IUL policies combine the death benefit protection of traditional life insurance with the potential for cash value accumulation, linked to the performance of a chosen stock market index, this blend of security and growth potential has made IUL a popular choice for clients seeking both protection and investment opportunities.

The appeal of IUL and other indexed products lies in their strategic advantages. Unlike traditional whole life policies, which offer a fixed rate of return, IUL policies allow policyholders to benefit from market gains while providing a safety net against market losses through guaranteed minimum interest rates. This dual advantage enables clients to participate in market growth without exposing their cash value to the full brunt of market downturns.

For clients, this means more than just life insurance. It means a flexible, tax-advantaged vehicle that can be tailored to meet a variety of financial objectives. Whether the goal is to build a retirement nest egg, fund a child’s education or create a legacy, IUL policies offer a powerful tool to address these needs.

One of the most compelling aspects of IUL is its potential for tax-deferred growth. The cash value within an IUL policy grows tax-deferred, allowing clients to accumulate wealth more efficiently. Additionally, the death benefit is generally paid out tax-free to beneficiaries, providing financial security when it’s needed most. This tax efficiency can make IUL an attractive alternative to other investment vehicles, especially in a high-tax environment.

As advisors, it’s crucial that we educate clients on the uses of life insurance beyond its traditional role. Life insurance can serve as a foundation for a comprehensive financial plan, offering liquidity, leverage and security. Here are a few ways to highlight the strategic benefits of life insurance during Life Insurance Awareness Month:

1. Retirement planning: IUL policies can supplement retirement income through tax-free loans or withdrawals against the cash value. This can be particularly valuable in managing tax liabilities and ensuring a steady income stream during retirement. As seniors surveyed said they expect to live longer, they’ll need comprehensive planning to ensure their retirement is adequately funded.

2. Wealth transfer: Life insurance can be a cornerstone of estate planning, helping clients transfer wealth to their heirs efficiently and with minimal tax implications. The death benefit can provide immediate liquidity to cover estate taxes and other expenses, preserving the estate’s value for future generations.  Wealth transfer is often overlooked in planning, and the surviving beneficiary — statistically often the wife — frequently has not been the primary contact with the advisor. Heading these issues off through a comprehensive plan can be a way to build trust and confidence with clients.

3. Business planning: For business owners, life insurance can be a critical component of succession planning. Key person insurance, buy-sell agreements funded by life insurance and executive bonus plans are all strategies that can protect the business and its stakeholders. Again, this is an important — and often emotional — exercise for business owners. Helping them plan with confidence is a great way to build a relationship and trust.

4. College funding: The cash value in an IUL policy can be used to fund a child’s education, providing a flexible, tax-advantaged source of funds that can grow over time.

As you engage with clients this September, remember the importance of regularly reviewing and updating their life insurance coverage. Life events such as marriage, the birth of a child, purchasing a home or starting a business can significantly impact their insurance needs. And as clients get older, help them prepare for out-of-sight changes — for example, the end of term life policies and possibly transitioning to whole life, or whatever might be best for them. A periodic review ensures that their coverage remains aligned with their evolving financial situation and goals. Recent studies have shown that clients trust advisors who are in regular or frequent communication more than those who communicate only infrequently.

Today, it’s essential to stay informed about the latest products and trends in the industry. The landscape of life insurance is continually evolving, with new products and features being introduced to meet the changing needs of consumers. 

Use this month to reinforce your commitment to your clients’ financial well-being, to highlight the innovative solutions available and to demonstrate the value of life insurance in building a secure financial future.