More ways to gain from the whole life boom

Some clients who bought less expensive term insurance at an early age — typically in their mid to late 20s and early 30s — may have anticipated that their insurance needs would be short-lived. Now, these clients have come to realize that they will need insurance coverage over a longer period, suggests says Lawrence Geller, president of L.I. Geller Insurance Agencies Ltd. of Campbellville, Ont.

These clients may still have a surviving spouse or children who might have a difficult time maintaining their lifestyles should the client pass away. Or, they may wish to cover terminal or estate costs.

“As we get older,” Geller says, “we need security.”

> Point out guarantees

“The guarantees provided by whole life makes it simple,” says John McVittie, president of APK Wealth Retention in Toronto. “There is a known, level premium, which can be paid up in as little as five or ten years.”

Younger clients may choose to pay the premiums earlier — higher premiums paid over a short period. These clients would have their life insurance needs taken care of without having to pay premiums when they get older.

While the early payment strategy raises the question of affordability, it appeals to clients who are attracted to the risk-free growth of the “basic” cash value in whole life policies. And should the client decide that he or she no longer needs insurance, they can “cash out” the policy at a future date, normally determined by policy design and policy performance, without any significant costs, McVittie says.

“This feature, offered by some insurance companies, has made whole life policies much more client-friendly,” he says.

> List the many uses of insurance proceeds

Tell clients that the proceeds of whole life insurance can be put to a variety of uses, such as:
– offsetting capital gains taxes payable on death;
– estate equalization;
– augmenting retirement income;
– charitable giving;
– collateral for a bank loan.

> Emphasize freedom from market worries

While other insurance products, such as universal life, can provide similar benefits, whole life is distinguished by its simplicity and guaranteed values. Unlike universal life, whose investment component typically varies with the performance of the stock market, whole life is less complex and frees the client from worries about market fluctuations.

Says McVittie: “The shock of the recent market downturn has brought new understanding to the value of whole life insurance.”

IE