Archive

Archive for the ‘Life Insurance’ Category

Bloomberg – What the Non-Insurance Advisor Needs to Understand to About Indexed Universal Life Insurance by Bill Boersma & Henry Montag

November 13th, 2019 No comments

Categories: Life Insurance Tags:

Whole Life Dividend Options and Policy Management

October 9th, 2019 No comments

Manage policies in your clients’ best interests.

Even though whole life (WL) insurance is one of the most traditional forms of life insurance, there’s an abundance of misunderstanding regarding how it works and the available dividend options. For the purposes of this piece, I’m referring to actual WL, not just permanent, cash value life insurance that many consumers generically refer to as WL. Universal life, indexed universal life, variable universal life and guaranteed universal life aren’t to be confused with WL.

Additionally, I’ll be referring to classic dividend paying WL, often referred to as “participating (par)” WL. It’s important to understand WL dividend options so you can make sure the policy is managed in the client’s best interest. Because I see so many problem policies, I understand why they’ve become problems; lack of understanding and lack of management. For full post, click here…

Categories: Life Insurance Tags:

Life Insurance: Told vs. Sold: Part 3

October 2nd, 2019 No comments

What policyowners are actually buying isn’t always necessarily what they think.

Part 2 of this series dug a bit deeper into the details of whole life and premium financing as it pertains to what policyowners are presented and what’s reality.

After highlighting the facts and figures that show this doesn’t really work as presented, I get the response “But Bill, that’s why we have the client pay loan interest out of pocket. It makes the program more conservative.” Frankly, that’s true, but how does that help relative to the misrepresentations I regularly see? All it does, it makes the policy look like it’s working on arbitrage, allow it to pay its loan off and keeps the collateral requirements lower. It doesn’t actually change the important dynamics of the transaction. If you add a couple hundred bucks to your mortgage payment every month, it’ll be paid off earlier, but it doesn’t change the deal. Putting more money down on a real estate transaction doesn’t improve the return on the property. The return is the return. Extra money down may make it less risky, but it absolutely doesn’t change the return. For full post, click here…

Categories: Life Insurance Tags:

Hybrid Life Insurance and Pension Protection Act 2006

September 30th, 2019 No comments

 

Categories: Life Insurance Tags:

What CPAs should understand about premium financing By Bill Boersma and Henry Montag

September 19th, 2019 No comments

Premium financing has been around for many years but it became more popular when LIBOR rates plummeted after the recession and perceived crediting rates on indexed universal life (IUL) insurance and whole life policies were relatively high.

Originally, the concept of premium financing was not much different than why one might not pay off a home mortgage, even when the money is available. If one thought that money deployed elsewhere would be more productive than paying down a mortgage, then why not do so? If I’m confident I can make more in the market or my business, financially it would be silly to pay down my mortgage any faster than necessary. Read More…

Categories: Life Insurance Tags:

Life Insurance: Told vs. Sold

September 17th, 2019 No comments

Over the course of my life insurance consulting career, it’s been much more common to be called in to fix things that are already in place than to be called in to help understand and build something right from the get go. For full post, click here…

Categories: Life Insurance Tags:

The Life Insurance Benefits of Quitting Smoking

July 24th, 2019 No comments

Kicking the habit can save clients a bundle.

I recently wrote about improving return in a life insurance policy through better underwriting.  No sooner had I done so than two cases came across my desk regarding the same issue that illustrated just how dramatically meaningful this can be.

Client Quits Smoking

A few years ago, I helped a neighbor with life insurance on himself and his wife. His wife’s policy was a straight forward $1 million 10-year term. She was healthy but a smoker so she got preferred smoker status.  The premium was $3,000. For full post, click here…

Categories: Life Insurance Tags:

Internal Rate of Return on Underwriting

July 16th, 2019 No comments

Pay attention to where it counts

It’s interesting to see where people put effort and concern and where they don’t.  Parents might go to extreme lengths to keep a child safe and healthy by purchasing the best reviewed products and most healthy food and participating in developmental activities.  However, without even thinking about it, they’ll then put that kid in a car to run to the store, and that’s the most endangering thing a parent could do to a kid according to the Center for Disease Control and the World Health Organization.  But do any of us use that as a reason to not visit grandma?

No.  We use modern car seats and seatbelts and review crash test data and hopefully don’t text and drive.  We do what’s needed to improve the chances of a positive outcome.  In reality, we’re simply not lending credence to those things we’re very comfortable with and that don’t make us stop and think.  Sometimes worse, we make decisions based on unsubstantiated rationale.  After all, we’re victims of emotion at times.  The same emotion that makes us go to some ridiculous length to prevent something from happening that, in all likelihood, is never going to happen is the same emotion that may drive someone to buy a tiny, gas efficient car to save the planet when the full size SUV is going to protect your kid far better. For full post, click here…

Categories: Life Insurance Tags:

The Bastardization of Premium Financing

June 10th, 2019 No comments

What you see isn’t necessarily what you get.

Wealthy people and business owners have always leveraged money and assumed risk but starting about a decade ago, after the 2008 crash, premium financing has been driven by very low London Interbank Offered Rate (LIBOR) based borrowing rates and aggressive return assumptions on insurance products that are easy to manipulate.

Indexed Universal Life (IUL) made a strong showing marketed by a particularly attractive story, if not altogether accurate.  Upside potential of the stock market without the downside risk sounded great with the memory of 2008 still fresh in minds.  These products can be illustrated at unrealistically high rates while appearing to be modest because few understood how they work.  Abuse is rampant even after the regulatory action of AG 49. For full post, click here…

Categories: Life Insurance Tags:

The Tragedy of Group Term

April 30th, 2019 No comments
Steer clear unless it’s the only option.

For full post, click here…

Categories: Life Insurance Tags: