VULs can be the SUVs of life insurance

The minivan was a mainstay of American society for good reason. It is a reliable people-mover and handy for a trip to the hardware store. Minivans are full of hidden compartments, easy to get in and out of, and comfortable. But the sport utility vehicle, in many ways, takes what a minivan can do and adds more power and flexibility — and a coolness factor you can relate to if you’ve given your kids driving lessons in a minivan. It is easier to find SUVs in various sizes, seating arrangements, heights and even fuel types (gas, hybrid, electric).

In many ways, indexed universal life insurance and variable universal life insurance can fulfill the same roles for most clients. But like SUVs are to minivans, VUL can offer more power and flexibility than a traditional IUL policy. VUL takes what IUL can do and adds the ability to invest directly into the market via subaccount options (albeit with the potential for downside market risk). The mixture of features, benefits, riders and subaccount options varies by carrier and product, but there is a good chance that a VUL product can provide the right mix for many clients.

Who is a VUL for?

• Those who want unlimited upside potential who can handle the potential downside of investment risks.
• Those who are willing to be responsible for making investment decisions and managing policy values.
• Those who are able to overfund their policies as needed based on policy objectives.

Help in making the decision

How can financial professionals best help clients choose between the many options available? Asking the right questions is an excellent place to start. Besides the basic questions regarding a client’s age, gender, health, etc., it is important to find out your clients’ financial needs, goals and risk tolerances.

After determining your clients’ suitability for VUL products, use these questions to help them narrow their options and make an informed decision.

What to ask your clients

• Is the focus on life expectancy or lifetime death benefit guarantees?
• Is the focus on cash value accumulation? Is there a need to insure two lives?
• Are multiple loan options of interest (fixed, indexed, variable loans)?
• Does the client want:
  • Low-cost index fund subaccount options?
  • ETF-focused subaccount options?
  • IUL-style index options in their VUL?
  • Buffered index options?
• Is there a desire to designate specific subaccounts for monthly deductions/charges?
• Is the client interested in carriers/products that offer persistency/bonus interest credits?
• Is there a need for a long-term care or chronic illness rider?
• Does the client want to make a significant lump sum payment but prevent the policy from becoming a modified endowment contract?
• Some carriers offer post-issue policy service programs. Is this valuable to the client?

Reviewing these questions with clients will help you understand their goals and expectations and help you feel more confident in providing options that may best suit their needs. The next step is to review products in the market to see which features and benefits will align best. This is where financial professionals can benefit from working with brokerage firms that can offer a deep knowledge base to help compare products and options available, along with compliance and controls to assure suitability.

When it comes to your clients’ protection planning, remember that VUL can be like an SUV, offering both powerful and flexible solutions for those willing to absorb potential market volatility risk.

John Gray is director of sales, Crump Life Insurance Services, and a registered representative with P. J. Robb Variable (Member FINRA). He may be contacted at [email protected].

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