How about some good news this week? I think it would be pretty welcome given the continuing economic turmoil. So here’s the deal – we found a way for your client to spend less in premium, have more coverage, and for the producer to be paid more
. So where’s the catch? Aside from having to actually complete annual reviews to make sure the client executes as designed, there isn’t one. Interested? Read on!
We all know about future increase options on permanent insurance, and how they can be used to protect insurability for future purchases. One of our carriers has come up with a future purchase option that is really flexible. When combined with an ROP term product the win-win-win scenario described above becomes a reality.
Here are the broad strokes:
- Rather than buy $10 million of GUL, buy $3.5 million with increases scheduled to reach $10 million by year 30.
- Buy a 30 year ROP contract for the balance of the coverage, for a total of $10 million.
- Use the ROP payment at the end of year 30 to drop into the UL contract at the end of the term.
- Design the GUL so that it has a level premium aside from the lump sum.
OK, great, what the heck do we really accomplish? Great question, and here is how it breaks down for a 33 year old male:
- Annual premium savings of $1,400 versus the full $10 million GUL for 30 years.
- Annual savings of more than $13,000 per year in years 31 and beyond (that is not a typo!).
- An increased IRR on death of anywhere from 11 basis points (year 40) to almost 700 basis points (year 10).
- Increased coverage in years 6 through 30 thanks to the additional coverage obtained via the future purchase feature on the GUL.
- More compensation as each of the increases is commissionable!
- And the cherry on top……higher projected cash values in every year. As much as $400K more!
This is just one in a series of Internal Rate of Return focused designs that we are using to win cases for our producers every day. For the sophisticated client, these are extremely compelling, and should be in your arsenal.
Let’s work on your next case together.
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