The Many Uses of Life Insurance
Posted by DAI Life Brokerage Services on December 11, 2011 · Comments Off on The Many Uses of Life Insurance
UL Insurance with accelerated benefits and Social Security replacement are unique applications of permanent life insurance coverage.
The longer I stay in this business and the longer I write life insurance policies for my clients, the more convinced I am that there is a solid place for lifelong life insurance coverage. The key to selling lots of permanent insurance is to first emphasize its indemnity value. This means that dollars purchased at a discount for a long time offers guarantees that emphasize flexibility and permanence for literally pennies on the dollar. Of course, this value proposition also works best where the value of permanent protection is created for both the beneficiaries and the person buying the insurance.
UL insurance with accelerated benefit
From this vantage point, there are two permanent concepts in today’s market that offer attractive features for your clients. The first is universal life insurance with an accelerated benefit rider feature. This form of permanent protection allows access to the death benefit value if the insured were to become chronically ill.
This means that the insured’s condition must be such that he either suffers from a cognitive impairment that requires substantial supervision or cannot perform unattended at least two of the six activities of daily living.
This form of permanent protection dramatically changes the landscape of financial protection from life insurance structured as a death benefit to a more encompassing “pool of money” concept. It uniquely broadens the definition of protection to more adequately cover life’s twists and turns—that is insurance that can be used either at death or with the arrival of a chronic disease.
Social Security income replacement
The second concept reminds us of how permanent life insurance can provide a unique, indemnity approach for families who wish to replace the income of a primary breadwinner. It should increase in the years ahead as the Baby Boomer generation moves into retirement.
This life insurance concept is known as Social Security income replacement. While the need can be covered by term life insurance, its best application is covered by permanent life insurance. Social Security income replacement solves the classic problem of what can happen financially to a surviving spouse at the death of a loved one. It’s the classic problem of what can happen to the financial needs of survivors when they lose anywhere from one-third to half of their income. It is a cruel reality for survivors who fi nd, at the most vulnerable time of their lives, that they are suddenly forced to give up their income although their expenses are not greatly reduced.
While there are many more useful applications of life insurance, I find that these two areas particularly focus on the unique applications of permanent life insurance coverage. And while job one for us is establishing the need for life insurance itself, permanent protection for a permanent risk is a proposition that serves the consumer best over the long haul.
Ike Trotter, CLU, ChFC, is president of Ike Trotter Agency, LLC, in Greenville, Miss.