Life insurance: Providing cash access and control

With today’s volatile markets, clients are increasingly anxious about having control of their money and easy access to cash. Our industry’s traditional product, participating whole life insurance, can be the right solution to address their concerns, providing living benefits for today and death benefit protection for the future.

Living benefits can include:

• Borrowing without a credit check.
• Loan repayment flexibility.
• Loan interest rates that are lower than the market.
• Ability to access capital for any reason — pay off debt, build wealth through other investments, or fund major expenses such as college, home renovations or even a vacation.
• Ability to cover large expenses while avoiding high-interest credit card debt.
• Strong guarantees that whole life is known for.

If you have clients with families to protect and funds that can be repositioned, now is the right time to have the whole life insurance conversation. The more uncertainty around us, the more important it is to provide flexible options offering security and protection.

Let’s look at a case study:

Sam and Maria are both 35 and have two grade-school-aged children. Although they have made good financial plans, they are still concerned about protecting their family should either of them die prematurely. Additionally, they are looking for multiple ways to diversify their overall portfolio and would like to own rentable real estate. And like all growing families, they want to maximize their hard-earned money and manage cash flow without interruption — all while preparing for life’s planned and unplanned financial situations.

As a result, their advisor recommended a whole life insurance policy with a $10,000 annual premium. This provides the ongoing protection needed and provides the family with cash flexibility. In Year 5 of the policy, they will have enough cash value to take a $30,000 policy loan to invest in rental income property. They will make loan repayments of $6,150 annually starting in year six and can continue taking loans every seven years thereafter for family vacations, college tuition and property maintenance. Meanwhile, the policy’s death benefit and cash value continue to grow tax deferred, to more than $600,000 and $280,000 respectively, in Year 25.

Solutions such as this provide:

• Guaranteed growth of cash value with liquidity, access and control.
• Peace of mind from strong, early, guaranteed cash values.
• Guaranteed increase in value with a guaranteed death benefit.
• Easy, tax-free access to cash value through policy loans throughout life.

Whole life insurance gives your clients the power of choice and thoughtful advisors should choose to present multiple options to meet client needs. To deliver a solution like this, look through your book of business for clients who:

• Are aged 30-65.
• Are in reasonably good health (get to know your preferred carrier’s underwriting guidelines).
• Have funds that can be repositioned.

And when looking at carriers, consider those who offer:

• Timely and streamlined loan processing.
• Disability income waivers of premium riders to offer asset accumulation and payment protection in the event of disability.
• A strong history of guaranteed performance.

Although most advisors talk about death benefits when selling life insurance, selling the living benefits as well offers a differentiated approach. And the living benefits of a participating whole life policy aren’t limited to covering big expenses or alternative investment use cases discussed previously. With the potential of tax-free lifetime access, a policy’s cash value can become an income stream during retirement or perhaps a buffer during early retirement before other retirement income kicks in.

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Mark Creighton, FLMI, ACS, AIAA is the regional vice president, south region at Mutual Trust Life Insurance Solutions, the U.S. life insurance division for Pan-American Life Insurance Group. Contact him at mark.creighton@innfeedback.com.