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Public Perception

With the entire country on edge throughout the COVID-19 pandemic, more and more Americans are realizing how uncertain their health could be. A large number of these people may be considering their own mortality for the first time and are especially worried about the financial security of their family should anything happen to them.

Furthermore, with the blow the economy has taken due to the pandemic and recent government restrictions, most Americans (especially small business owners) have unfortunately had to come to terms with how fragile their financial situation can be.

Yet, despite the fact that people generally recognize the value of life insurance, research conducted by the Life Insurance Marketing and Research Association (LIMRA) shows that 46% of Americans do not have any sort of life insurance and many more do not have enough coverage.

Where is the Disconnect? 

As an advisor, it is your job to help your clients understand the importance have proper planning as well as educate them on all the options available to them. Permanent life insurance is a valuable tool that can certainly provide for your clients’ family, should they die prematurely. Additionally, cash value life insurance, if structured properly can boost your clients’ financial security during time where they may be out of work or need extra funds to pay for things like medical bills.

Opportunities from COVID-19: Utilizing Cash Value Life Insurance

Market Fluctuations

As you know, the market dropped significantly at the beginning of this pandemic, putting your clients’ investments at risk. For example, the S&P dropped more than 12%  at the beginning of the pandemic.

By design, cash value life insurance may have protected your clients’ money during this time.

One major benefit of Cash Value Life Insurance is it allows your clients to participate in part of a market’s upside but protects your downside risk. Although the crediting rate of a cash value life policy is usually subject to a cap on its return, unlike the market, there is a floor through which the policy’s crediting rate cannot fall.

As a result, your clients’ policy gets to participate in the market upside but the risk during a downturn is mitigated. This adds a stabilizing element to your policy.

Furthermore, in the wake of the market drop, your clients would have been given the opportunity to capitalize on potential investments. Had they taken a loan from their insurance policy and used that money to invest after the coronavirus plunge, they would have seen huge profits now that the market has rebounded. In fact, in August of this year, the S&P 500 closed at its highest level ever erasing the historic fall it experienced in February and March.


To help those who have been financially impacted by the COVID-19 outbreak Congress has set aside $2.2 TRILLION, or $2,200,000,000,000, for economic relief funding. As a result, which direction do you think taxes will be going in the future? Up or Down?

Not to worry!

Cash value life insurance provides your clients with an important cash accumulation tool. It can serve as a tax deferred nest egg. According to the section 7702A of IRS code, life insurance cash values are not taxed:

  • As it grows, because they are taxed deferred
  • when a loan is taken against the policy
  • when death proceeds are received

The cash value that builds up in a life insurance policy is tax deferred.

Next Steps  

Learn more about what strategies to show your clients based on their demographics. 

Learn More About our Proven Life Insurance Strategies

Post by Travis Pence
September 17, 2020