Bring New Value to Year-End Planning for Clients

In the coming weeks, many of you will be meeting with clients to collect information needed for year-end planning. While there, be sure to also ask if they know how much they are being charged for life insurance and/or how their invested assets underlying policy cash values are performing.

Many clients think the "premium" is the "cost" of the life insurance.  However, for most life insurance policies, the premium is not the "cost" of the policy in the same way that a contribution to an IRA is not the cost of the IRA.  In most cases, the costs are the expenses deducted from the life insurance premium/cash value and/or IRA contribution/account value. 

As such, many clients have little to no idea what they are actually being charged for cost of insurance charges (COIs) and policy expenses, and/or what they are actually earning within their life insurance portfolio.  To make matters worse, there are few, if any, financial products where the difference between best-available rates and terms (BART) and poorly-priced/performing products is as great as it is in life insurance products.

For instance, three independent studies – one by Tillinghast Towers Perrinⁱ, a second by one of the largest third party administrators (TPA) of trust-owned life insurance (TOLI) policy holdingsⁱⁱ and the third being the research from THEInsuranceAdvisor.COM database – all indicate the disparity between best available rates and terms and poorly-priced products is as much as 40%. In other words, it is possible/probable some clients are being overcharged by 40% or more, often for the same type of policy with the same qualitative characteristics and sometimes even from the same insurer.

Herein lies the opportunity to add new value to your year-end planning for clients.  And while you need not actually investigate the fairness of COIs and policy expenses and the reasonableness of cash value investment performance at this time, be sure to collect the necessary data now so you can revisit and bring new value and generate new potential business opportunities after the busy season.

So when meeting with clients to collect information needed for year-end planning, ask them for an "inforce illustration" of hypothetical policy values (i.e., the insurers representations as to future COIs and policy expenses and performance assumptions).  If they do not have a recent inforce illustration, then click here for a number of Request for Illustration (RFI) letter templates available on our web site. 

Once you receive the inforce illustration, simply send it to our confidential fax server at 800-409-3222 or via e-mail to cpe@theinsuranceadvisor.com.  Either way, the result is a complete Confidential Policy Evaluator (CPE) Research Report  that determines the appropriateness of pricing, the reasonableness of performance expectations for invested assets, underlying policy cash values, and overall suitability for your client's policies based on the 5 major factors of suitability.  It is an easy-to-use tool that goes well beyond simply comparing illustrations and company ratings. With CPE, you know how the product under evaluation measures up against the benchmarks for ALL products in its peer group, and why. 

If you are not already a subscriber, then click here to subscribe and get up to 3 Confidential Policy Evaluator (CPE) research reports under our NO-Risk trial subscription.