Why Aren't You Selling Cash Value Life Insurance?

Many financial experts in the news today recommend purchasing life insurance that doesn’t build up cash value. According to the 2010 Individual Life Insurance Sales Survey by LIMRA, two popular types of life insurance policies purchased in the United States today are term (40 percent) and secondary guarantee universal life (GUL) (a portion of the 14 percent of universal life purchased). Level, non-return of premium term does not build cash value, and any cash value in GUL is generally exhausted internally to help support the death benefit guarantee.

During the past decade, and especially throughout the recent financial challenges, much of the industry has successfully commoditized our products and shifted the sales focus from value to price. Many lost sight of cash value accumulation, which is one of the key benefits of life insurance. While term insurance has increased in popularity, the majority of life insurance purchases are made on permanent policies (60 percent, according to LIMRA), and selling cash value benefits can be very important to many purchasers today who may be predisposed to term.

For example, the baby boomer generation has begun to make its way across the retirement age goal line, and those at the leading edge of Generation X are looking for additional means and vehicles to save tax-deferred money. Recent LIMRA research shows that consumers understand the value of life insurance and that they need more – but more than 40 percent of Americans put off purchasing because of other financial priorities, including saving for retirements, according to the 2010 Life Insurance Ownership Study. By helping people understand that saving for retirement and purchasing life insurance are not necessarily mutually exclusive, you can open new doors of opportunity.

Cash value life insurance can help these clients accumulate tax-deferred and potentially tax-free dollars for retirement purposes. Maximum funded non-modified endowment contract (non-MEC) life insurance should be considered as a part of the asset stage on which the client stands during retirement. (Under Internal Revenue Code, policies become MECs if cumulative premium payments exceed certain specified amounts, and additional taxes or distribution penalties may be assessed during the life of the insured. Be sure to illustrate policy benefits based on assumptions that won’t exceed the tax law limits.)