Total insurance in force is one criterion that rating agencies look at when ranking life insurance carriers. That’s one reason why carriers often tout their insurance in force.
But is this the right focus? Why not focus on how much tax-free income heavily funded life policies can provide?
This is not to say retirement money should not also be invested in tax-deferred accounts like 401(k)s. Rather, it is to recommend changing the basic focus on how life insurance has been sold during the past couple of decades.
Currently, two of the most popular contracts sold are term life and no-lapse universal life. Term is not known to build cash values, and universal life with no-lapse guarantees suppresses cash values to focus on guaranteed death benefit protection with minimal cash value accumulation.
The question is, has the industry sold itself (and more importantly its customers) short by framing the life insurance sale this way? That’s an especially important question to explore in view of the deterioration of employer-provided defined benefit plans and government plans (e.g., Social Security). Shouldn’t the sale be framed to focus on the value to the customer for the money spent, including the value during retirement?
Think about it. What other financial vehicle can provide tax-free income other than a heavily funded life policy? And the only limit is the amount of money the customer wants to use to fund his or her retirement.
Do consumers know this? Has the industry demonstrated the financial power of life insurance to provide tax-free retirement income?
Perhaps the industry has framed the sale all wrong over the past couple of decades and has let the life insurance conversation focus on price, therefore commoditizing the contract without discussing value.
Effective sales in life insurance are all about positioning. The life insurance industry has one of the greatest financial instruments available to provide tax-free retirement income–at any age, for any duration, in any amount (if properly funded). Unfortunately, the industry has framed the discussion to focus on death benefits.