One of our key programs at Ash Brokerage is our Life Audit. This program looks at currently in-force life insurance policies and performs a stress test to see if the policy is still performing to meet the client’s needs.
When we first introduced this program, we were inundated with requests on policies that, in the advisors’ words, were blowing up. Most of these were interest-sensitive universal life policies or variable universal life policies that had not performed according to the original illustration that was presented to the client.
Let me be clear: Nothing was wrong with any of these products. They were solid policies sold by, mostly, reputable insurance agents and financial advisors. The problem is they were sold with unrealistic long-range interest rates or woefully underfunded premiums and ignored for long periods of time.
This UL implosion has led most advisors to run 180 degrees in the other direction and continually ask for more guarantees, sometimes lifetime guarantees, in order to protect their clients. Guaranteed UL isn’t a new concept, but in the past 15 years it has been the highest sold universal life product in the industry.
Many of these sales are appropriate, as older clients are using insurance to take care of potential estate taxes or leaving a legacy to their families or a favorite charity – I love to see that type of planning and appreciate the positioning of the guaranteed product.
However, many illustration requests we receive are for younger individuals who, by positioning them into a GUL, are being blocked by the many other benefits that a life insurance policy can provide.
If you were buying a car and the dealer said it was guaranteed to last three years or 36,000 miles, whichever comes first, you would be hesitant to purchase it. While three/36,000 may be the max warranty, most dealerships tout their brands’ reliability and often show their vehicles still performing at 200,000-plus miles. You want to buy a vehicle based on what it can do, not what it’s guaranteed to do.
In “Apollo 13,” Gene Kranz told his team “I don’t care what anything was designed to do, I care about what it can do.” It’s the same with life insurance. Sure, the basic benefit of life insurance is if you pass away, it will pay a tax-free benefit to your beneficiaries. But what else can it do?
A properly designed permanent life insurance policy can do a lot for your client. However, if you’re only asking for that “max guarantee,” you may be limiting their options and hurting your own credibility.
© 2018 Ash Brokerage LLC.