As our industry prepares to celebrate Life Insurance Awareness Month in September, we’re all called upon to help ensure that people have protection and the potential to secure their financial futures. Index universal life (IUL) insurance may be one of the drivers of success in that mission, and it also holds potential to boost the bottom-line business objectives of financial professionals.
Through the first half of the this year, IUL accounted for 55% of all universal life (UL) premium, according to a LIMRA briefing on Aug. 16, 2016.[1] Given market volatility, it’s not surprising that people are attracted to the guarantees and protection that IUL offers, as LIMRA shared in a recent press release.[2]
Although all IUL solutions offer guaranteed floors to shield policyholders from loss in down markets, and they also provide the potential for cash value growth linked to the performance of indices (such as the S&P 500®), IUL products are not one-size-fits-all. That’s because some policyholders seek the opportunity for aggressive accumulation, while others prioritize guarantees above potential growth in cash value.
Considering Needs
Client mindset is one factor that may help determine the most suitable product match; client age and retirement readiness are others. In keeping with best practices, it’s prudent to conduct a comprehensive financial assessment at the outset of planning to help ensure that all needs and appropriate solutions are considered for each individual, family or business situation.
A robust IUL insurance product, structured with the goal of offering vigorous growth and income potential, may be most fitting for clients in their mid-30s to mid-50s who seek accumulation, but also want multiple options for accessing cash value in the policy.
On the other hand, clients who are more focused on the protection features of IUL may prefer a solution designed to serve as an affordable alternative to a guaranteed universal life (GUL) insurance product. An economical IUL insurance choice may be best for Baby Boomers who primarily want a death benefit for income replacement, estate planning or wealth transfer purposes.
Offering Utility
When it comes to customization features, IUL insurance solutions vary significantly. Clients who are attracted to IUL products built for protection and conservative growth in cash value may not be inclined initially to purchase optional riders. However, they may benefit from education about the value proposition of life insurance that has been designed to meet multiple needs.
For example, if clients have met the terms of their IUL insurance policy and have been diagnosed by a physician as having a chronic illness, they may be eligible to receive living benefits by accelerating a portion of the death benefit. In fact, even if their illness is not permanent, they may still be able to receive living benefits. This possibility is not one clients would have learned about prior to this year, as the removal of the permanency requirement from some accelerated benefit riders for chronic illness is a very recent market development.
Leveraging Resources
Numerous educational tools are available to help financial professionals and their clients understand how potential life scenarios, such as a chronic illness, a severe cognitive impairment or the need for long-term care have been considered in the design of modern IUL insurance solutions. Premier carriers who have a broad, diverse product portfolio should be able to point readily to offline and interactive, online resources that can be reviewed with clients in an initial meeting or call and accessed by clients independently, for refresher purposes, afterward.
During Life Insurance Awareness Month and beyond, financial professionals who leverage such informational resources, along with thorough needs assessments and a clear understanding of how today’s IUL insurance products are designed to work, have optimal opportunity to connect clients to solutions that will serve them well on the road to retirement and beyond.
Rod Rishel is Chief Executive Officer of Life, Health and Disability, AIG Consumer Insurance. He can be reached at [email protected]. American International Group, Inc. (AIG) is a leading global insurance organization. Founded in 1919, today the company provides a wide range of property casualty insurance, life insurance, retirement products, mortgage insurance and other financial services to customers in more than 100 countries and jurisdictions. Additional information about AIG can be found at www.aig.com and www.aig.com/strategyupdate.
The Company, its financial professionals and other representatives are not authorized to give legal, tax or accounting advice. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. For advice concerning your situation, consult your professional attorney, tax advisor or accountant.
[1] LIMRA’s Third Quarter Industry Briefing, Aug. 16, 2016, http://av.limra.com/Teleconferences/Kerzner-2016-3/CEO-Q3call.mp4
[2] “LIMRA: Individual Life Insurance Premium Increases in the First Quarter 2016,” LIMRA press release, June 2, 2016,http://www.limra.com/Posts/PR/News_Releases/LIMRA__Individual_Life_Insurance_Premium_Increases_in_the_First_Quarter_2016.aspx?LangType=1033
