Life Cycle Financial Planners, LLC

Tag: universal life insurance

Why Do High Net Worth People Own Permanent Life Insurance?
High net worth people tend to appreciate value and typically want life insurance protection for life.

Permanent life insurance (sometimes referred to as whole life insurance) offers much better value for life insurance buyers than any type of term life insurance. The net cost of permanent life insurance is undeniably better.

Net cost is the total premiums paid minus the total cash value. For example, if $80,000 of total premium is paid into a permanent policy over 10 years and the cash value of the policy is $80,000, there is a net cost of $0. That is not an error. It is how permanent insurance is designed. Comparatively, if $40,000 of total premiums were paid into a term policy over the same period, the net cost would be $40,000. The cost of term insurance increases as we get closer to life expectancy while a whole life premiums are level or may have been paid up in the early years.

The longer you own a permanent life insurance policy, the better the net cost will be. A lower net cost number is better. Conversely, the longer you own term insurance, the higher the net cost will be.

There are two types of life insurance that all policies fall into – permanent insurance and term life insurance. Most jumbo life insurance policies are permanent policies.

What are the differences between term insurance and permanent life insurance?

Permanent life insurance provides lifetime coverage, meaning that it can be designed to provide lifetime coverage or coverage to a target age. The target age is selected by the policy owner, not the insurance company. Not everyone needs or wants coverage for life.

Some permanent life insurance policies build up equity or cash in the policy and some do not. Because term insurance has lower premiums in the early years, people mistakenly believe that term insurance is “better” coverage. Not only does permanent insurance have much lower net cost over time, it has much greater flexibility and it is more easily customizable.

Permanent life insurance is the best value for lifetime coverage.

Term insurance is temporary insurance – it expires at the end of a guaranteed period. Permanent insurance will stay inforce as long as the policyowner wants to keep it. Permanent insurance puts the policyowner in control of when coverage ends, not the insurance company.

What Nobody Tells You About Term Life Insurance.

“Over the past 25 years, people were sold a complicated marketing gimmick called “buy term and invest the rest”. Individual policyholders were told they could invest better than insurance companies, encouraging them to invest the annual difference between a term premium and the higher premium for a permanent policy. The difference would go into a side investment fund to be invested with hope it would be used to pay for the much higher term premiums later in life.

Buy term and invest the difference has proved to be a costly mistake for millions.

Although this sounded reasonable to unsuspecting life insurance consumers, “buy term and invest the rest” proved to be nothing more than slick marketing. It has been primarily promoted through multi-level marketing groups and entry level insurance agents. The projections are often run using unrealistic interest rates to grow the side fund. Someone who bought a 20 year term policy in 2005 may have seen projections using 7% while the actual interest rate over that period was half that amount, or less. The proponents often use average S&P returns to justify using high growth assumptions within the side fund. That is not a fair assumption either because the side fund cannot afford losses, forcing the side fund to invest conservatively.

Insurance companies invest and manage billions of dollars compared to individuals who usually invest much smaller amounts. Insurance companies employ the best and brightest in their investment departments and insurance companies are able to monitor assets on a 24/7 basis, while policyholders cannot. There are no taxes paid while the insurance company is managing the assets. Person after person will tell you they never invested the annual difference. They bought inexpensive term insurance but never built up a side fund. The few who did invest, did not invest with discipline. If they skipped years or withdrew funds from the side fund account, the whole thing was derailed. The result is a messy trail of people with expiring term policies or compromised health. In worse case situations, some have no side fund and they cannot get new coverage because of health issues.

Most people do not convert their term policy for good reasons.

More and more people buy permanent life insurance when it is properly presented to them. “But what about Dave Ramsey and Suze Orman who don’t like permanent life insurance?” They are not insurance professionals and they do not offer advice to individuals because that would require them to be in compliance, carry the proper licences and put their reputations on the line. It is easy for pundits to make unsubstantiated claims. They sell ad space, books or subscriptions.

Buying life insurance is often a process over a lifetime, not a one-time event. Term insurance can be the right decision for young families. The right time to consider buying permanent insurance is sooner than later. The following triggers lead people to consider permanent insurance:

When moving from the “paycheck to paycheck” lifestyle, we become potential permanent life insurance buyers. Since ninety seven percent (97%) of all term policies do not pay a claim, then 97 percent of ALL term premium were wasted. High Net Worth (HNW) consumers and high income earners choose permanent life insurance because it has better value:

Replacing Your Income: If your family or business depends on you and your income to run smoothly, permanent life insurance is the right product for those who can handle the higher premiums.

Immediate Liquidity: Very wealthy people own permanent life insurance. They want the guaranteed liquidity it provides at death.

Permanent Life Insurance Is The Best Tool For Mitigating Succession Planning Problems:
- The value of assets fluctuates significantly and death is always the worst time to sell a business or other assets.
- Many people have children working in a family business. Life insurance is the great equalizer for those children who do not work in the business. Without liquidity in these cases, there is great risk to a smooth succession of a family business.
- More and more grandparents own a life insurance policy for each of their grandchildren. The insurance policy is straightforward, inexpensive and a “feel good” asset knowing how it will impact the grandchildren.
- Premium Financing. Wealthy people have the ability to finance life insurance. When it makes sense, it is a very effective tool to create tax free wealth.
Please contact us at 561-771-4647 or email me at TB@LifeCyclePlanners.com about a free review.

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https://en.wikipedia.org/wiki/Whole_life_insurance l https://en.wikipedia.org/wiki/Life_insurance#Permanent_life_insurance

best life insurance. what is term insurance?
April 19, 2021
Buying A Jumbo Life Insurance Policy, What You Need To Know.
Jumbo life insurance policies typically exceed $10,000,000 but there is no hard and fast rule about this. Both term and permanent life insurance can qualify. Jumbo life insurance policies are bought by high income earners, high net worth individuals and ultra-high net worth individuals. Underwriting these policies is completely different than underwriting policies with smaller face amounts and lesser premiums. Many insurance companies have special underwriting teams dedicated to jumbo policies and the agents who specialize in them.

What are the Advantages of Buying Jumbo Policies?

If you own or if you’re in the market for a jumbo life insurance policy, you should be seeking the best policy rates. Whether you are considering term insurance or a permanent policy, our knowledge and experience in the jumbo market will help you secure the best coverage possible at the lowest possible price.

High net worth consumers and ultra high net worth consumers often need permanent life insurance, which is the most cost advantageous way to purchase life insurance. Permanent life insurance has superior net cost, versatility and flexibility. When purchasing jumbo insurance coverage, you want to take advantage of the special policies and programs for the jumbo market. Not all insurance companies specialize in this market. The ones that do may have special rates for larger face amounts. The ultimate rate class issued to the policy is crucial in this market where the difference between a preferred and standard rate could be as much as 20% annually.

As such, the underwriting class for jumbo policies should be the top priority for the agent representing you. This means the agent should be knowledgeable, experienced and able to demonstrate previous success in this market. Agents must be experienced in the medical and financial underwriting issues, which are big parts of these cases. For example, a $2,000,000 term policy might cost 10% more for a standard rate as opposed to a preferred rate. That difference might only be $150 per year because of the low face amount and low premiums for term insurance. But, when comparing that same 10% difference for a $20,000,000 permanent policy, the annual savings may be $50,000, or more. The best rate class always matters and it should be priority number one!

Better Rates For Jumbo Policies

Agent’s Role in Jumbo Life Insurance Underwriting.

Experienced agents are advocates for their clients while simultaneously acting as a fiduciary working in their best interest. Fighting for the best rate class can be a contentious process. Undoubtedly, every agent wants a shot at placing a $50,000,000 policy but most are simply not experienced or knowledgeable enough to provide the level of experience and professionalism that is required to get these policies placed. Clients win by working with us. Contact me for a jumbo life insurance quote.

Management of your underwriting information is very important in jumbo cases:

Insurance companies often share information with other insurance companies, either directly or through the Medical Information Bureau (MIB). Of course, this is typically disclosed and authorized by the life insurance application. The chances of future underwriting problems can increase if the underwriting process is not managed properly, each and every time you submit an application.

Tips for buying jumbo life policies:
1. Clear up previous underwriting history. It is important to start the underwriting process by documenting a 5 year health history. An explanation detailing how much coverage is currently inforce is critical. How much existing coverage will be replaced and how much total coverage will be inforce at the end of the process is helpful information for underwriters.
2. Identify the right insurance company for each insured. There are hundreds of insurance companies vying for these policies. Quickly, we are able to rule out the companies that don’t fit and focus on the right ones. Consumers are not being served properly by spreadsheeting life insurance rates on websites. Trying to put all the important variables on a spreadsheet in an attempt to compare “apples to apples” is shortchanging life insurance buyers, especially jumbo life insurance policyholders. It is done to commoditize insurance products for the insurance companies. Think of insurance companies as product manufacturers.
3. Prepare a cover letter, including health history. This is an agent drafted story of the case that helps underwriters justify the best possible rate for the new coverage, including any current and past health issues. We recently helped a 66 year old woman acquire a jumbo policy for succession planning purposes. She had been on lithium for 15+ years without incident. Suddenly, she developed a lithium tolerance that created unique health issues and significant underwriting challenges. By providing this information to the underwriters, it helped them realize it was an uncommon medication problem, enabling them to make a reasonable offer.
4. Product and company consideration. The underwriting classes are often different for permanent and term insurance. Some companies may be more competitive for permanent coverage while others are well known for low term rates. Selecting the right product from the right company can be complex.
Please contact me at 561-771-4647 or email me at TB@LifeCyclePlanners.com for more information.

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Permanent Insurance

life insurance, jumbo life insurance, best life insurance, large life insurance policy, universal life insurance, term insurance
April 29, 2019
Term Life Insurance In Danger of Lapsing?

Is your term life insurance lapsing?

Do you know when the conversion deadline in your term life insurance policy expires?

One of the most critical dates in a term life insurance policy is the conversion deadline. You don’t want the conversion deadline to pass without your consideration. Insurance companies DO NOT notify you as the deadline is approaching. Many people who purchased term life insurance within the past 20 years may not understand this option. Term life insurance lapsing can create problems for families and businesses. Too many inforce policies do not allow you to convert the policy in all years without new evidence of insurability. To avoid finding yourself with limited options after the deadline has passed, speak with an insurance professional.

Why would I convert my term policy?

To continue a term life insurance policy after your health has changed, the conversion option is key. You may never need to convert your term policy to permanent insurance but if you have a significant health problem after purchasing the policy, you may fall into the rated or un-insurable category. When this happens, that conversion deadline becomes critical. Conversion may be your only option to keep life insurance with premiums based on your previous good health. Unfortunately, there are millions of people who are unable to convert because the deadline expired. For example, if you own a 20 year term policy, it may only be convertible in the first 10 years or until age 65.

What should I know if I own a term policy?

You want a policy with no conversion deadline or the longest one possible, something like 80% of the guaranteed term period. It is equally important to buy from a company that allows you to convert to their entire portfolio of products. Some companies limit term conversions to only one policy, often not their best. Terry Savage offers some great advice in her recent column about term life insurance lapsing because of unknown conversion deadlines. If nothing else, check your current policy’s conversion deadline.

https://www.terrysavage.com/term-insurance-running-out/

https://wgntv.com/2018/08/01/financial-expert-terry-savage-on-term-life-insurance-credit-card-debt/

Can I buy a term policy with Living Benefits?

Living Benefits may be the single most important enhancement to life insurance in the past several years. At no additional premium, Living Benefits allows you to draw against the face amount of your policy when you have a critical, chronic or terminal health event. It is not a loan and there does not have to be any cash value in the policy. It is an advance and it comes from the face amount. You can receive up to 90% of the face value depending on the severity of the health incident.

If you currently own life insurance, chances are good that your policy does not have these Living Benefits. Adding Living Benefits and a better conversion deadline are two good reasons to consider new coverage.

We offer state of the art solutions for life insurance and lifetime income annuities. Let us help you minimize your premiums and maximize the value of your coverages. Please call us at 561-869-4500 or email me at TB@LifeCyclePlanners.com. Upon request, we will send a complementary overview of Living Benefits.

August 3, 2018
Lower Your Life Insurance Premiums With A Smart Hybrid Policy – Protect Your Beneficiaries Better.
Lower the Cost of Your Life Insurance and Protect Your Heirs the Way You Intended:

Until now, life insurance buyers did not have an option to structure the payment of the policy’s proceeds to their beneficiaries. All that has changed – now you have the control to design the payout exactly as you want them paid. Why does this matter?

Turning the proceeds into guaranteed payments by the insurance company LOWERS THE ANNUAL PREMIUMS as much as 40% and protects the proceeds from every kind of risk.

Do you want the beneficiaries of your life insurance policy to receive a lump sum? One of the most important things you can do for your heirs is to protect them exactly as you intended when you decided to purchase life insurance. Remarkably, life insurance proceeds only last, on average, 3 years! Ask any parent or spouse if they INTEND the proceeds to be gone in 3 years. That is never their intention.

The perfect plan guarantees the number of payments you choose, turning the proceeds into payments that can never be mismanaged. With interest, the insurance company makes structured payments to your beneficiaries based on the plan you create when you set up the policy. Everything is guaranteed. You can change the plan anytime.

For example, instead of a $2,000,000 lump-sum payment, your beneficiaries can receive equal payments of $200,000 for 10 years. Or equal payments of $100,000 for 20 years. How about a plan that pays $500,000 upon death and 10 more equal payments of $150,000? Each person is different and now, each person can customize the payout to meet their precise, individual needs.

It gets better. The premiums can be as much as 40% lower every year depending on the time frame you choose. Or, for the same premium in your current policy, you can increase the amount of insurance up to 40%!

The “Installment Payout Option” allows the policy owner, at the point of purchase, to choose how many years to defer these payments.

Win –Win: You either purchase up to 40% more life insurance for the same premium as a lump-sum payout or lower your annual premiums up to 40% every year. By choosing a greater number of payout years, the ANNUAL SAVINGS is increased.

The surge in annuity sales over the past several years is evidence that principal protection and guaranteed results are critically important to millions of consumers. “This groundbreaking alternative is the perfect life insurance solution”, says Ted Bernstein of Life Cycle Financial Planners. And, it is available for both term and permanent coverage.

Why upgrade to the Installment Payout Plan?
1. Transform lump-sum proceeds into guaranteed installments.
2. Offers the most competitive premiums available – everything GUARANTEED.
3. Reduces premiums as much as 40% for same amount of death benefit.
4. Protects life insurance proceeds from market risk.
5. Tremendous flexibility, installment periods between 5 and 30 years.
“The biggest challenge we face is raising awareness of this important option”, says Ted Bernstein, Owner of Life Cycle Financial Planners. “Almost everyone can upgrade their insurance coverage and we are uniquely qualified to help our clients…even smokers and people paying more for rated policies.”

Please call us at 561-869-4500 and let us help you compare your existing policy with the benefits of the Installment Payout Option. Or, email Ted.

Make sure to inquire about Life Insurance with living benefits and turn the face amount of your life insurance policy into an emergency health insurance fund.
October 20, 2016
Is Your Universal Life Insurance Policy Keeping You Awake?

Is Your Universal Life Insurance Policy Keeping You Awake?

Several months ago I began writing about a few life insurance companies that are increasing the insurance rates within certain policies. The highly unusual practice is contractually permissible but RARELY done. Some have started arguing, and suing carriers, suggesting it is not legal. I helped the Wall Street Journal and several other very well respected journalists with their coverage. It is an important topic for those impacted by these increases.

If you own a Universal Life policy and you are concerned about it, contact me and I will be glad to offer what I can to give you guidance. You can reach me at 561-869-4500 or email me at: EMAIL TED

Most policies are not in immediate danger of lapsing or needing higher premiums. IS YOURS?

Something interesting is happening that is worth mentioning. Some Whole Life salespeople are universal life bashing.

The problem here is NOT universal life. The problem is how insurance companies failed and fail to communicate with their policyholders about how to manage a universal life policy. The proper way to manage a Universal Life policy is easy to convey and communicate to every policyholder but the companies have left this very important issue up to their agents. Some agents do, too many don’t. What happens if your agent leaves the business? What happens if your agent forgets? Each and every year, the insurance company can mail you, email you and use all sorts of other tools to inform you that the policy may be underperforming. If you monitor the policy and make tweaks along the way, you won’t find yourself going over a cliff.

The issue:

Whole life costs more for the same coverage, it is not flexible, and will not be competitive when rates are moving up quickly. Its higher annual premiums prevent many people from ever getting permanent insurance. It simply costs too much for the majority of life insurance buyers.

If you put the same Whole Life premium into a Universal Life policy and a Whole Life policy for the same person, run at the same interest rate or dividend scale, and then compare them, they will perform almost identically. The guarantees in Whole Life are usually stronger for a difference that I do not consider to be very meaningful. Nearly every inforce Universal Life insurance policy in the U.S. (tens of millions or more) is not at the minimum interest rate and is not charging the guaranteed cost of insurance. The Whole Life companies are also nowhere near their guaranteed dividend scale, typically Zero percent.

Yet, every Whole Life policyholder is paying premiums as if the dividend scale was Zero percent. This means that Whole Life policyholders are OVERPAYING for insurance coverage to never have a premium increase to maintain their coverage. There is nothing wrong with that structure. Once people understand that they are paying for or will have to pay for guarantees that no insurance company is presently experiencing, most want a better option.

The BETTER option:

The better option is a flexible premium, adjustable life insurance policy that gives you the flexibility to add premiums if you need to, when you decide it makes sense. You make those coverage decisions with the guidance from a professional, at least once a year. By doing so, you will never be caught off guard and any changes can be met with a measured reaction. The result is that you will pay less for your coverage each year but retain the right to raise the premiums.

Who should own Whole Life insurance?

A simple question with a simple answer, finally. For my clients who know at the outset that meeting annually to discuss their coverage is less likely than not and those clients who don’t voluntarily save well, Whole Life is a good option. They will pay more to make sure any changes don’t negatively affect them and the Whole Life premium cannot be missed which helps some people create a forced savings.

So, why then should a person buy Universal Life over Whole Life? The answer is to pay lesser premium and have more flexibility. The difference in flexibility is not close. The higher premiums put into a Universal Life policy will essentially create identical values in the UL policy. By doing this, you will be overfunding the Universal Life policy which is exactly what the Whole Life policy does. The Whole Life company gives you a dividend to compensate for the increased premium they charged you.

It is this difference in flexibility that opens the door for Universal Life to be mismanaged and underfunded. It is not a matter of product superiority or inferiority.

My comments are not based on any type of inability to offer Whole Life. I am able to offer my clients nearly every whole life contract available in the market. I am not against Whole Life. I am for it when the client profile, goals and objectives warrant its use.

All life insurance should be monitored annually for numerous reasons. There once was a time when you could put a life insurance policy in a vault, pay the premiums and never think about it. That ship has sailed and for good reason. Even if we could go back to that time, is it in our best interest to do so? Absolutely not. From here we need to learn this valuable lesson about a product’s evolution and the NEED to monitor the policy with a professional, once a year. Once you get the hang of it and understand how the internal and external factors are impacting policy performance, the monitoring process is 15 minutes per policy with most of the work done by your insurance professional.

MY OFFER: I am offering you a 15 minute, no obligation phone call, to discuss any concerns you may have about your inforce coverage. I normally charge to do policy audits and I have been providing this service for 30+ years to individuals, attorneys, C.P.A.’s and trust companies. The Wall Street Journal has done a good job covering this Universal Life topic and I would be happy to email the articles to you, upon request. It is an honor to be quoted by such an esteemed business publication about a topic that I am very passionate about.

Ted Bernstein
Retirement Planning
561-869-4500 – Direct

September 13, 2016