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Almost 1 in 2 American households have a life insurance protection gap of $200,000 each – for a total market need of $12 trillion. Get strategies for the top 3 opportunities in the underinsured market.
Lower-cost premiums and higher cash value potential. Take a look!
…And Blissfully Guaranteed
The vagaries of the market….. We know that some investments rise as others fall; and that returns ebb and flow. Diversification of asset classes prevent over-exposure of certain assets in a financial melt-down. For example- Bonds may be spared in a stock market collapse while real estate, or even cash, may be investment “safe havens.” Only one asset class is perfectly non-correlated to everything- completely independent of all financial influences………
Perfect non-correlation means independence from outside financial influence. Virtually all investments respond to financial conditions in a yin-yang fashion. Gold prices fluctuate with currency and interest rate changes. The value of Bonds go down as interest rates rise; and rise as interest rates fall. Equity indices seem to respond (or maybe react) to everything.
The only perfectly non-correlated asset class is life insurance. Examining the Internal Rate of Return (IRR) at Death– that is, the rate of return you would have to realize on the premiums paid in order to equal the benefit paid at death– can make a compelling case to have life insurance in every well-diversified portfolio. Modern life insurance pricing is producing very attractive IRR’s at Death to life expectancy and even later—–with positive returns even past age 100.
Case Study
John is a 60-year-old career professional with a well-diversified investment portfolio consisting of Stocks, Bonds, Cash, Real Estate and International Stock & Bond funds. A substantial portion of his portfolio should be unneeded for retirement and will go to heirs, and to charitable bequests, at his death.
Here are certain aspects to consider for making an argument for John to purchase a life insurance policy, on his own life, as part of his portfolio:
John’s life expectancy: | Age 85 (25 years) |
$1,000,000 policy on John’s life: | $14,500 annual premium* |
Death proceeds payable: | $1,000,000 (income tax free) |
Total premiums paid ot life expectancy: | $362,625 |
IRR at Death at Age 85: | 7.12% |
IRR at death at age 95 (LE + 10 years): | 3.49% |
Enhanced Cash Surrender Value at age 85: | $362,626 |
*Premium and death benefit are guaranteed to age 105.
A carefully selected life insurance policy can deliver impressive returns whenever death occurs, and the returns are perfectly non-correlated to outside financial influences.
Only One Asset Class is Blissfully Unaffected by the Markets ……
….and Blissfully Guaranteed
For agent educational purposes only. Not for use with the public.
It’s estimated that 70% of people over age 65 will need Care at some point of their life; but….. some people choose not to obtain coverage to protect against this financial risk. Why? Well, some people feel certain that they’ll be in the 30% who won’t need Care; others simply think they have enough assets to “Self-Insure”.
Now, new combination plans can take a small portion of liquid assets and, via leverage, provide for efficient risk management to pay for Care while providing a 100% Return of Premium guarantee from day one……….
Case Study
- Bill is a 68-year-old business owner who is considering selling his business and retiring. The business has provided Bill very good cash flow thru the years which, with the help of his Financial Advisor (FA), has allowed him to accumulate substantial assets including Stocks, Bonds, Cash and Real Estate holdings.
- Bill’s mother is 89 years old and was diagnosed with Alzheimer’s Disease a few years back; she’s now in a Nursing Home. Bill writes the checks each month to pay for her Care so he can quickly tell you that the cost of a private room in a nursing home in Mississippi is over $7,000 per month.
- He’s heard that 70% of people over age 65 will need some form of Care during their lifetime but he’s not concerned; he knows that he’ll be in the 30% who won’t need it. He also feels he has enough assets to self-insure (should the unlikely occur). So, there’s no reason to waste money on something he doesn’t need.
- Bill and his FA recently sat down to discuss his possible retirement.
- They agree that his portfolio should provide the income he needs to live very comfortably in retirement.
- His FA agrees that if anyone can beat the 70% odds of needing Care, it will probably be Bill
- But, he points out to Bill that if he needs Care, as unlikely as it may be, he’ll be paying for it with 100 pennies on a dollar (after tax pennies) and, even a well-diversified portfolio such as Bill’s can take significant hits from time to time (as Bill’s portfolio did during, and a few years following, the late unpleasantness of 2008 and 2009), So, if he needs Care during a period like that, he’ll be paying for it with very expensive dollars.
So he poses a question to Bill, “If a Long-Term Care Insurance plan provided you a 100% Return of Premium guarantee (thus the “cost” would be the loss of earnings on the premium paid), while providing income-tax free leverage of $3 or $4 to $1 to pay for Care, would that be worth considering?”.
He gives Bill an example what a policy, paid via $150,000 taken from his cash reserves, would provide:
- An initial $474,615 pool of funds to pay for Care for up to seven years (leverage of $3.16 to $1) and grow, via a 5% Simple Interest Inflation Benefit, to $722,241 by age 80 (leverage of $4.81 to $1), or
- $150,000 of surrender value, from day one (less any benefits paid for Care), or
- $150,000 death benefit (less any benefits paid for Care or Cash taken from the policy).
If you were Bill, what would you do?
“Portfolio Insurance” ……. for Efficient Risk Management.
For producer education only; not for use with the public.
PL01152019
Employers can bonus money and other cash equivalents to employees. One cash equivalent is inexpensive term life insurance. If the employee dies, the beneficiary receives the insurance tax free. But what if the employee doesn’t die?
LIFE INSURANCE IF YOU DIE…..…..TAX-FREE CASH IF YOU DON’T
Term Life + Cash is an inexpensive way to offer a great benefit to a key employee. The definition of “key” is in the hands of the employer —it can be the employer himself (in C Corporations), a secretary, a manager, a relative working at the company—any employee the employer chooses.
Case Study
- John is a key sales manager at Loosen Up Manufacturing, Inc. (Loosen Up)
- He’s 45 years old and is in good health,
- Loosen Up buys a $1 million 20-Year Return of Premium term policy for John,
- John names Jane, his wife, as the beneficiary,
- Loosen Up pays, and deducts, the premium of $3,880 every year for 20 years,
- John reports the $3,880 as taxable income and pays $1,164 in taxes each year (30% tax bracket),
- If John dies, $1 million insurance benefit is paid to Jane tax-free,
- If John lives, at the end of the 20th year, the total premiums paid by Loosen Up are returned to John,
- Total taxes paid by John on the employer-paid premiums = $23,280 ($1,164 x 20),
- Total return-of-premiums payable to John (income tax free) = $77,600 ($3,880 x 20),
- Tax-free Rates Return in 20 years is 10.45% ($1,164 paid in for taxes for 20 years; $77,600 received as return-of-premium).
Here’s how it works.
- Employer chooses the term life plan and the term period,
- Employee owns the policy and names the beneficiary,
- Employer-paid premiums are deductible by the company,
- Employer-paid premiums are includible by the employee as income,
- If the employee dies, the life insurance proceeds are paid to the beneficiary, tax free,
- If the employee doesn’t die, premiums are refunded to the employee, tax free.
EXECUTIVE BONUS TERM WITH CASH
Inexpensive. Efficient. Tax Advantaged.
For producer education only; not for use with the public.
New “imbedded” benefit plans providing coverage for Long Term Care expenses are now available on specially designed Annuity products. With recent tax law changes, distributions taken from those plans to pay for Long Term Care expenses are received income tax free!
……FOR LEVERAGE AND TAX-EFFICIENCY
Non-Qualified Annuities can be an excellent tax deferred vehicle to provide income later-in-life. The problem with the Tax Deferred Annuity growth is that deferred taxes are due- and payable- regardless of why the withdrawals are made.
A new tax law that became effective in 2010 allows for the combination of annuities with Long Term Care insurance coverage with significant tax advantages. With the new products developed to take advantage of this opportunity 1- the annuity balance, depending on the plan, is doubled or tripled (2X to 3X premium) for Long Term Care use, and, 2- any distributions used to pay for Long Term Care needs are received income tax free.
Case Study
Jane is a healthy 70-year-old widow who recently retired. She has a nice pension, a couple of CD’s, a modest investment portfolio and a Non-Qualified Deferred Annuity (Annuity) with a value of $250,000.
She bought the Annuity 20 years ago with the intention to use it to supplement her retirement income; she now feels blessed knowing that she doesn’t really need additional income.
As she heads into retirement, she’s concerned about reports that show an estimated 70% of people over age 65 will require some form of long-term care services during their lifetime. While paying premiums for Long-Term Care Insurance isn’t out of the question, she doesn’t like the idea of paying premiums for something she may never use; so now she plans to use the Annuity to pay for Care should she ever need Care.
Jane meets with her Financial Advisor and he listens to her concerns and ideas. He shares with her that annuity distributions, even those made to pay for Long Term Care, will be taxable as gains over basis (and he reminds her that she bought the Deferred Annuity 20 years ago and has significant gains in the contract). He goes on to tell her that the Pension Protection Act of 2006, that went into effect in 2010, allows for income tax-free withdrawals from specially designed non-qualified annuities when the withdrawals are used to pay for Care expenses. He’s used this type of product with other clients and suggests that she might want to consider it too.
He then shows her how, via a Partial 1035 Exchange of $100,000 of her $250,000 Annuity into one of these specially designed products, the results would be as follows:
- Via the LEVERAGE provided by the insurance, Jane creates a $255,208 benefit to pay for Long Term Care expenses for 60 months (up to $4,253 per month),
- she’s created significant tax efficiency to pay for Care, while
- freeing up $150,000 to spend as she pleases.
ANNUITY UPGRADE
A MOVE FROM TAX-DEFERRED TO TAX-EFFICIENT
For Producer educational use only; not for use with the public.