Increasing Client Cash Flow with Temporary Life


Increasing Client Cash Flow with Temporary Life

Upon entering the insurance business, I learned I should do two things: Uncover the need and find the money to pay for that need. A prospect with a need – but not the means to pay for it – isn’t really a prospect. Obviously, the more money you can find, the more of the need that can be met.

Frequently, you can fulfill a need and find the money by suggesting your prospect purchase a single-premium immediate annuity (SPIA) and using the annual payments for life insurance premiums. This creates a systematic process for the client and provides the funds just when they are needed to pay the premium. Additionally, it provides you with two sales opportunities. 

Many times, in wealth transfer situations for older clients, a limited-pay option may be utilized i.e. 10-pay life paired with a 10-pay certain SPIA. Hypothetically, let’s assume a $100,000 SPIA paid out 10 payments of $10,000. What if that same $100,000 instead generated 10 payments of $11,000? Wouldn’t your client now be able to afford more insurance? Alternately, if the SPIA payout is increased, your client may be able to generate the same $10,000 premium for less than $100,000, say $92,000.

The temporary life payout option gives your client greater purchasing power and cash flow. The key difference between a 10-year temporary life payout and a 10-year certain payout, which may normally be used, is that the temporary life option pays out for the lesser of 10 years or death. Because a chance exists that the payouts might stop prior to the 10-year guaranteed period, the amount of the payments increases. The older the client, the greater the chance of death prior to the 10-year period, so the greater the payout differential. For older clients, payout differentials in the double digits are not uncommon. 

The Bottom Line: Utilizing the Temporary Life payout option may result in increased  cash flow, enabling your clients to fill more of their critical need for insurance protection, and greater revenue to your practice.