Why are so many Americans still reluctant about purchasing life insurance? Roughly one in five American shoppers say a reason they have not bought more life insurance is because they have other financial priorities right now.1
Clearly, there is still a significant need for people to build more financial reassurance into their portfolios by adding life insurance, but there is a gap in their understanding of how they may be able to achieve multiple goals through today’s innovative insurance products. That’s why it’s so important for financial professionals to realize the possibilities available via products like FIUL, which can help their clients get the death benefit protection they need along with the potential to address other financial issues that may be more top of mind.
One such area of potential lies in “never money,” or idle assets. This is the pool of money a client doesn’t need to maintain their lifestyle – and therefore never intends to touch, and may have decided to leave to beneficiaries or charitable organizations. But even though this money isn’t intended to be used, it doesn’t mean it should truly sit idle. An FIUL policy could be a powerful option that provides a level of protection, accumulation potential, efficient transfer, and access.
If your client needs life insurance coverage and has a lump sum of money they won’t need to access later in life, they could allocate idle assets to an FIUL policy.
The benefits of an FIUL policy help meet these four needs that clients may have for their never money:
- Protection: An FIUL policy pays a death benefit to beneficiaries that provides financial reassurance – including the knowledge that they will receive the proceeds generally income-tax-free.
- Accumulation potential: FIUL policies provide secondary features such as the potential to build tax-deferred accumulation. Life insurance also provides the ability to leverage the assets through the death benefit if the insured were to die.
- Efficient transfer: The generally income-tax-free death benefit provided at the death of the policyholder generally avoids probate and goes directly to the beneficiaries.
- Access: FIUL policy holders have access to any available cash value income-tax-free through policy loans or withdrawals for any purpose they choose.2
If you haven’t already, now is the time to consider how FIUL might fit into the products and solutions you are currently providing to your clients. Although life insurance may not be thought of as the key component of a solid financial foundation, it can truly be the engine that helps drive your client’s strategy – providing both the protection and the flexibility necessary to help navigate an uncertain financial future.
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1 2019 Insurance Barometer Report, Life Happens/LIMRA
Policy loans and withdrawals will reduce the available cash value and death benefit and may cause the policy to lapse, or affect guarantees against lapse. Withdrawals in excess of premiums paid will be subject to ordinary income tax. Additional premium payments may be required to keep the policy in force. In the event of lapse, outstanding policy loans in excess of unrecovered cost basis will be subject to ordinary income tax. If a policy is a modified endowment contract (MEC), policy loans and withdrawals will be taxable as ordinary income to the extend there are earnings in the policy. If any of these features are exercised prior to age 59½ on a MEC, a 10% federal additional tax may be imposed. Tax laws are subject to change and you should consult a tax professional.