Balancing Risk and Reward with a GUL product
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A 2016 survey by the Life Insurance Market Research Association (LIMRA) found 70 percent of middle-class American respondents feel it is getting harder to maintain their lifestyle.1
With changing economic times it is important for advisors to shift their selling techniques to better suit their clients personal and financial situations. As you know, indexed universal life (IUL) sales become less attractive for clients in bad economic times. Agents who typically stick to IUL products may want to consider pushing cheaper and less volatile products such as term or guaranteed universal life (GUL) insurance.
Although term insurance may the best fit for certain clients in certain scenarios, clients are essentially renting their coverage in this case. Should those with a term insurance policy decide to extend their coverage after their term period is up, they can expect much higher premiums due to their change in age and overall health. Moreover, they may even be denied coverage if their health has deteriorated significantly. Additionally, it is very unlikely policyholders will even need coverage during their specified term period. According to Tim Maurer, Forbes magazine contributor, only about 2 percent of term life insurance policies actually pay out a death benefit.2
For clients who want the best “bang for their buck”, so to speak, with the least amount of risk, a GUL product may be the best fit.
New products have been released that may provide a better solution for these types of clients. Some carriers now offer GUL products that offer guaranteed lifetime death benefit protection and the option to cash-out the policy should the client’s needs change in the future. If the client’s circumstances change or they no longer need life insurance, a new Guaranteed Cash-Out Rider may be a way to restore financial stability. For this carrier: on the 15th, 20th and 25th policy anniversaries, the rider allows the owner to surrender the policy and receive a partial or full return of their premiums paid.
For instance, a 30-year-old male, with a preferred health rating, may qualify for a $300,000 policy with $100 per monthly premiums. With a Guaranteed Cash OutRider, should he decide he does not need life insurance anymore, he can surrender the policy at age 55 and receive $30,000 from the policy or surrender the policy at age 60 or 65 and receive 100% of his money back? If he wishes to continue his insurance coverage, he simply continues paying his $100 premium and is guaranteed $300,000 in death benefit. Whereas, if he had originally purchased a 15, 20, or 25-year term policy he would almost certainly incur substantially higher premiums and run the risk of being denied coverage if he wanted to buy more life insurance.
Although term insurance provides the least amount of risk when it comes to life insurance products, clients who want to balance their risks with their rewards may want to consider looking at GUL products in today’s market.
Ultimately, a person who wants to purchase either of these products should consider all their options and seek the advice of an independent financial or insurance professional to decide which method is right for their personal situation.
1 Retrieved from (http://www.limra.com/Posts/PR/News_Releases/New_Research__7_in_10_Find_It_Harder_to_Maintain_Middle_Class_Lifestyle.aspx)
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