17. Client’s policy was issued when the client was a smoker; but the client stopped smoking over 10 years ago. Premiums still reflect the smoker classification.
18. Client took out large loans on whole life policies. The loans are still outstanding and the client is paying interest rates of 7% or higher.
19. Policy values are not projected to be high enough to ever pay the policy premiums.
20. 5-10% of policies are in danger of lapsing in less than 3 years, with another 20% lapsing in 3-7 years.
26. 6% of policies had a cash surrender value greater than $500,000Resource Insurance Consultants (RIC) of Omaha, Nebraska
27. The Industry Response As with any product evolution, life insurance products have become more efficiently priced and flexible in nature. In addition, there are many variations of product architectures available that can serve as wonderful alternatives to older policies that are not performing, and/or were never structured properly. The industry response has focused on the following areas: Regulatory - Reserves on secondary guarantee products Reinsurance Landscape - Consolidation in reinsurance industry - Older age mortality - Table shaving programs Product Design Trends - Industry reached floor on low premiums - Refinement of features - Priced to minimize undesirable sales Interest Rate Trends - Near historic low-yields, both short and long-term - Impact on secondary guarantee pricing For Producer Use Only
28. 2001 CSO Mortality Table Changes Premiums to Age 121 Lower Guaranteed COI’s Lower TAMRA / DEFRA Premiums Guaranteed Cost of Insurance Charges Male Non-tobacco tables used For Producer Use Only
29. Product Landscape The industry has responded with a lineup of products that can help clients reach their financial and insurance goals, while still providing a comfortable level of stability. Term Life (TL) – life insurance that pays a sum of money only if the person who is covered dies within a specific period of time Universal Life (UL) – permanent life insurance where premium payments above the cost of insurance are credited to the cash value Whole Life (WL) – life insurance that remains in force throughout somebody’s life rather than only for a term of years Indexed Universal Life (IUL) – affordable life insurance with the ability to accumulate cash values that grow with the upward movement of a stock index without the normal downside risk associated with the equities market Variable Universal Life (VUL) – life insurance that builds cash value, which can be invested in a variety of separate accounts For Producer Use Only
30. Risk vs. Reward of Life Insurance Policies Risk vs. Reward Trade Off (By Types of Permanent Life Insurance Product) High Variable Universal Life Indexed Universal Life Growth Potential (Cash Accumulation) Whole Life Universal Life Term Life Low High Volatility (Risk) For Producer Use Only
31. How PEP Can Help Policy Evaluation Process (PEP) provides an objective perspective on your client’s: Life insurance requirements Life insurance performance Life insurance options A simple, yet thorough, analysis process can help bring transparency and confidence to life insurance choices. For Producer Use Only
32. The PEP Process For Producer Use Only Review and evaluate current policies and compare them to alternative solutions. Review Analyze Evaluate 1 2 3 Review your client’s current needs and purpose for life insurance. Does the existing amount and type of insurance meet their current requirements? Discuss your client’s needs and objectives and Complete the In-Force Policy Review Form.
33. Possible Outcomes of PEP A Policy performing Continue to review periodically to be sure policy is on course. If existing policy is performing as expected or better, and if needs have not changed, no further analysis is needed. B Policy not performing If funding needs to be increased to reach goal, or if the goal has changed, work with your advisor to correct the situation within the existing policy. If existing policy is not performing as expected, or if needs have changed, determine action required to reach goal within existing policy. Evaluate C Consider alternatives Work with your advisor to determine which new policy would best suit your needs. If appropriate, consider other policies. For Producer Use Only
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38. Trust-Owned Life Insurance Due Diligence Trustees need to provide ongoing due diligence on the life insurance owned by the trust to avoid possible litigation. PEP can be an integral part of fulfilling the necessary due diligence, addressing the following key questions: Do the current life insurance policies still meet the trust beneficiaries’ needs, or the purposes for which they were originally purchased? Are there increasing premium requirements? Are there newer policies that may provide secondary death benefit guarantees, lower costs due to mortality improvements, additional rider options, or improved underwriting classifications? What are the financial ratings and stability of the life insurance carrier? For Producer Use Only
39. Are You Evaluating Your Clients’ Life Insurance Polices? Here Are 4 Ways To Get Started… 1. Download a quote request form from www.abacusinsadvisors.com 2. Email us at illustrations@abacusinsadvisors.com 3. Request your copy of our customized In Force Policy Review Form. 4. Call us at 877.672.1401 For Producer Use Only
40. EXCEED BEYOND YOUR EXPECTATIONS. Join Abacus Insurance Advisors. Established relationships with carriers, expert guidance and exceptional service are just a few of our concierge level offerings. At AIA, we take care of your back office needs so you can focus on building your business. We invite you to leverage our comprehensive resources and become another AIA success story. Our promise is that your experience with AIA will surpass your expectations. ABACUS INSURANCE ADVISORS, LLC You Can Count On Us. Phone 864.672.1400 Toll Free 877.672.1401 Fax 864.281.9662 Website www.abacusinsadvisors.com 109 Block House Road Greenville, SC 29615 Abacus Insurance Advisors, LLC is an insurance marketing subsidiary of Asset Management, Inc. Neither Abacus Insurance Advisors, nor its employees or agents are authorized to give legal, accounting or tax advice. You should consult your own legal or tax professional regarding the purchase of any life insurance policy. For Producer Use Only
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