Note: This content has been updated slightly since it first appeared on www.insurance-forums.com.
As we celebrate Life Insurance Awareness Month in September, financial professionals are called upon to help ensure that people have protection and the potential to secure their retirement readiness. Index universal life (IUL) insurance may be one of the drivers of success in that mission.
Through the first half of the this year, IUL accounted for 55 percent of all universal life (UL) premium, according to a briefing by the industry organization LIMRA on Aug. 16, 2016.1 Given market volatility, it’s not surprising that people are attracted to the guarantees and protection that IUL offers, as LIMRA shared in a recent press release.2
Although all IUL solutions offer guaranteed floors to shield policy holders from loss in down markets, and they also provide the potential for cash value growth linked to the performance of indices (such as the S&P 500®), IUL products are not one-size-fits-all. That’s because some policy holders seek the opportunity for aggressive accumulation, while others prioritize guarantees above potential growth in cash value.
Client mindset is one factor that may help determine the most suitable product match; client age and retirement readiness are others. In keeping with best practices, it’s prudent for financial professionals to conduct a comprehensive client assessment at the outset of planning to help ensure that all needs and appropriate solutions are considered for each individual, family or business situation.
A robust IUL insurance product, structured with the goal of offering vigorous growth and income potential, may be most fitting for people in their mid-30s to mid-50s who seek accumulation, but also want multiple options for accessing cash value in the policy.
On the other hand, people who are more focused on the protection features of IUL may prefer a solution designed to serve as an affordable alternative to a guaranteed universal life (GUL) insurance product. An economical IUL insurance choice may be best for Baby Boomers who primarily want a death benefit for income replacement, estate planning or wealth transfer purposes.
When it comes to customization features, IUL insurance solutions vary significantly. People who are attracted to IUL products built for protection and conservative growth in cash value may not be inclined initially to purchase optional riders. However, they may benefit from education about the value proposition of life insurance that has been designed to meet multiple needs.
For example, if policy holders have met the terms of their IUL insurance contract and have been diagnosed by a physician as having a chronic illness, they may be eligible to receive living benefits by accelerating a portion of the death benefit. In fact, even if their illness is not permanent, they may still be able to receive living benefits. This possibility is not one most people would have been aware of prior to this year, as the removal of the permanency requirement from some accelerated benefit riders for chronic illness is a very recent market development.
Numerous educational tools are available to help financial professionals and their clients understand how potential life scenarios, such as a chronic illness, a severe cognitive impairment or the need for long-term care have been considered in the design of modern IUL insurance solutions. Premier carriers who have a broad, diverse product portfolio should be able to point readily to offline and interactive, online resources that financial professionals can review with clients in an initial meeting or call, and that clients can access independently for refresher purposes afterward.
During Life Insurance Awareness Month and beyond, financial professionals who leverage such informational resources, along with thorough needs assessments and a clear understanding of how today’s IUL insurance products are designed to work, have optimal opportunity to connect people to solutions that will serve them well on the road to retirement and beyond.
Rod Rishel is Chief Executive Officer of Life, Health and Disability, AIG Consumer Insurance.
The Company, its financial professionals and other representatives are not authorized to give legal, tax or accounting advice. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. For advice concerning your situation, consult your professional attorney, tax advisor or accountant.
American International Group, Inc. (AIG) is a leading global insurance organization. Founded in 1919, today we provide a wide range of property casualty insurance, life insurance, retirement products, mortgage insurance and other financial services to customers in more than 100 countries and jurisdictions. Our diverse offerings include products and services that help businesses and individuals protect their assets, manage risks and provide for retirement security. AIG common stock is listed on the New York Stock Exchange and the Tokyo Stock Exchange.
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AIG is the marketing name for the worldwide property-casualty, life and retirement, and general insurance operations of American International Group, Inc. For additional information, please visit our website at www.aig.com. All products and services are written or provided by subsidiaries or affiliates of American International Group, Inc. Products or services may not be available in all countries, and coverage is subject to actual policy language. Non-insurance products and services may be provided by independent third parties. Certain property-casualty coverages may be provided by a surplus lines insurer. Surplus lines insurers do not generally participate in state guaranty funds, and insureds are therefore not protected by such funds.
1 LIMRA’s Third Quarter Industry Briefing, Aug. 16, 2016, http://av.limra.com/Teleconferences/Kerzner-2016-3/CEO-Q3call.mp4
2 “LIMRA: Individual Life Insurance Premium Increases in the First Quarter 2016,” LIMRA press release, June 2, 2016, http://www.limra.com/Posts/PR/News_Releases/LIMRA__Individual_Life_Insurance_Premium_Increases_in_the_First_Quarter_2016.aspx?LangType=1033