Who needs life insurance? Well, almost everyone. Purchasing life insurance can seem mistakenly complicated and expensive – but it doesn’t have to be.

Some of the most common reasons people buy life insurance are to replace income, pay for funeral expenses, transfer wealth to the next generation, pay off a mortgage, or pass on a business. There are also many reasons people choose not to buy it. Other financial priorities get in the way or people mistakenly think it’s too expensive. If they have life insurance already, they may think they have enough despite life circumstances changing like getting married, having a baby, or buying a new house. Life insurance costs less than most people think. The fact is, a $250,000 term policy only costs, on average, $160/year for a healthy 30 year old.¹

This video illustrates the need for life insurance and highlights common misconceptions while emphasizing its affordability. Share this video now with your community and encourage those you know to make an appointment and speak with an advisor today.

¹Source: 2019 Insurance Barometer Study, LIMRA and Life Happens

Download and share this video with your online community. Spread the word about life insurance and make a difference in the lives of loved ones now.

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Life Insurance Awareness Month (LIAM) is the perfect opportunity to reach out to your clients about life insurance. Whether it’s a life event like a new baby or a wedding or divorce, circumstances change and so does the need for life insurance.

Many organizations like “Life Happens” will be flooding social media and advertising channels to remind consumers about the need for life insurance.  Don’t miss the opportunity, while it’s top of mind, to reach out and engage clients and potential clients during Life Insurance Awareness Month.

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Across the nation, September marks Life Insurance Awareness Month (LIAM). LIAM serves as a necessary reminder to individuals that life insurance is an important, and often forgotten part of financial planning.

The theme this year, “It’s not for you. It’s for them.”, by Life Happens, annual organizer of LIAM, is focused on who life insurance is really meant to protect – your loved ones. There are few better ways to illustrate this than by watching the role parents play in families.

Think about how many ways parents support their loved ones — the indispensable tasks they take care of on a daily basis. What happens when that support is interrupted? While life insurance can’t replace a loved one, it can make the financial path easier for those left behind. Once the life insurance is in place, it is done. No more thinking about it.

Encourage those you know to make an appointment and speak with an advisor today.

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In order to educate clients on the inherent risks of a premium financing program, it is important to “stress test” any plan proposals. Stress-testing may involve any of the following:

1. Illustrating the plan using reasonable increasing future cost of borrowing
2. Illustrating the policy with a lower than current crediting rate, we suggest using 85% of the current rate
3. Illustrating the combined effect of 1 and 2

The best way to demonstrate the importance of stress testing your premium financing cases can be illustrated by using a real example. Highland was asked to opine on a financed supplemental retirement income design, using a leveraged indexed universal life product. The client, a male aged 40, was to borrow $200,000 a year for ten years, accruing 100% of the loan interest, and repay the third-party loan at the end of year 15. He would then take an income of $434,105 per year for 25 years, beginning year 26 via participating policy loans.

Quick math on the proposed plan design:

✓ $2,000,000 of premium borrowed

✓ $528,000 out of pocket interest payments by the client, amounts over $40,000 accrued

✓ $10,852,625 of tax-free income

✓ $3,157,092 of tax-free death benefit

What could go wrong?

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There are many ways to fund an insurance program. In most cases, the funding source is the checking account of the client or trust. However, what do you do when your client’s funding needs outpace their available liquid assets or gifting capacity?

Reading the title of this article would lead most to conclude that the focus is on clients who borrow funds from a bank to pay annual insurance premiums. That is not entirely wrong. However, when the team at Highland thinks of financing life insurance premiums, we think in terms of premium funding strategies. That includes commercial premium financing, but also private finance, split-dollar, sales to intentionally defective grantor trusts, and dual loan strategies.

There’s no free lunch

You may be familiar with the phrase, popularized by the award-winning economist, Milton Friedman, ‘there’s no such thing as a free lunch’. Commercial premium financing is no different, this is a pay me now, pay me later proposition. While the initial interest cost is very low, at 5% of the 1st year premium, the cost to simply service the funding escalates quickly reaching 50% by year ten. Not to mention the increasing collateral exposure the client must plan for annually. This simplistic example below assumes a static interest rate environment. An increasing cost of borrowing only serves to increase the ongoing servicing cost, or the outside collateral exposure.

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Did you know that many products available today, which you may be presenting to clients and taking applications, must be placed inforce by the carrier on or before December 31^st? You can thank Principal-Based Reserving or PBR and the 2017 CSO Mortality Table changes for accelerating year-end business.

What is PBR and why is it, along with the CSO Mortality Table change, impacting year-end sales?

Hint: It has nothing to do with your favorite beer.

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