Strip a permanent life insurance policy such as universal life of its ability to accumulate cash value and what’s left is a product that offers the policyholder a guaranteed death benefit to age 100, yet costs only slightly more than a term policy.
“What it amounts to is a term-to-100 product,” explains Marvin H. Feldman, CLU, ChFC, RFC, head of the Life and Health Insurance Foundation for Education. Since it comes with a lifetime guarantee and zero cash value, it mimics term [life insurance]. It’s all death benefit.”
The price for such secondary guarantee products lately has dropped into a range where it is competitive for certain clients with that of term insurance, says Daniel M. Mul? of MetLife. “For permanent insurance, it’s about as low-cost as you can find. It’s becoming much more affordable for older-age clients, where previously it might have been out of reach to all but the very wealthy.”
Investing in such a product gives policyholders greater estate-planning and wealth-transfer flexibility than does a conventional term policy, Mul? adds. The guaranteed death benefit provides the ability to transfer wealth to heirs affordably and tax-efficiently.