Life Insurance Insights

We are living in an era of increased volatility driven by the COVID-19 pandemic, global supply chain disruptions, plunging stock markets, and Europe’s first war in nearly eighty years. In these uncertain times, can life insurance advisors continue to cut through the noise and negativity to bring value and peace of mind to their clients?

The answer is a wholehearted “Yes!”

Life insurance is a great vehicle for security in a volatile environment and should be part of every long-term investment strategy. It holds up in tough economic times, offering not just protection, but also retirement income and a guaranteed internal rate of return (IRR) that holds its own against other investment products.

So how can advisors generate more business in these economic times? By going back to the basics and doubling down on the same approach we recommend during periods of stability.

Start with getting to know your clients and listening to their needs. Generating more business is not about pushing harder or being more forceful with your clients, but about having both genuine empathy and a strong working knowledge of the products available. Remember that in times of volatility, people are searching for security, stability, and a listening ear, and we have the privilege of offering this to them. In your communication with clients, emphasize the ways in which life insurance can provide a sense of safety and certainty–not only for the future, but also for today.

You should also offer a policy review. Many times, a client bought a policy years ago and has no idea what is in it. Find out what they already have and help them adjust their coverage according to their goals. This is also an opportunity to discuss old life insurance versus new life insurance. Many clients are unaware that life insurance now includes living benefits, and as you walk through their existing coverage, you may find significant gaps that you can help fill.

You will find that if you master these practices, you will have no trouble generating more business, even in today’s volatile environment.

—  Ken Shapiro, President

Living and breathing life insurance as we at First American Insurance Underwriters do, it is easy to forget the assumptions that most people have—that life insurance is only used when you die, and the only people who benefit are the family you leave behind.

While providing for loved ones is a powerful and important motivator for clients, this narrow view overlooks the living benefits that life insurance products provide. If we do not highlight the living benefits of life insurance, recognizing that our clients and prospects think it just provides a death benefit, we miss an opportunity to serve them.

Chronic Illness and Long-Term Care riders on these modern Life Insurance contracts are a vital resource for people in need of assistance with daily living, mobility issues, and mental disorders. A well-designed policy can provide hundreds of thousands of dollars to cover essential costs and still leave a substantial residual death benefit. A well-designed life insurance policy can be adjusted for inflation—a topic that is top of mind for many Americans right now.

Cash Value Life insurance, especially Whole Life and Accumulation Universal Life products are designed specifically with the living in mind. The tax-advantaged cash value in the policy helps accomplish future goals. Life Insurance products like Indexed Universal Life policies, grow by utilizing hedging strategies that allow you to participate in market uptrends while minimizing or eliminating the downtrends. This year’s market volatility highlights the advantage of downside protection. People who are less risk averse or are experienced in investing and desire tax-advantaged full equity market participation can choose variable life insurance. This product offers many sub-accounts that allow you to participate in the market. The First American team can guide you as to the most appropriate solution for your client.

Flexibility and choice are the names of the game. When speaking with clients, show them how life insurance fits into their overall planning, whether their goal is related to long-term healthcare, supplemental retirement planning and beating inflation, or simply providing for their families. Life insurance is not just for dying anymore.

— By Tony O’Kussick, Director of Operations

Since the start of the pandemic, the life insurance industry has rapidly adapted with the most significant changes happening in the areas of product availability and the application process.

The first trend stems from the serious uptick in overall deaths caused by COVID-19, or more accurately, it stems from the temporarily diminished life expectancy in the U.S. that the pandemic caused. Carriers have dealt with this reality through dynamic covid-imposed guidelines and by developing products that seek to distribute as much of the risk to the insured as is workable. This trend has affected availability in some instances, with terms and products varying from carrier to carrier. The result was that some consumers found it more difficult to procure life insurance during this period. Thankfully, lifesaving scientific breakthroughs have continued to happen at an incredible rate, allowing for a more optimistic underwriting climate moving forward.

The second trend is because of technological advances that are improving the underwriting process. In some cases, the entire underwriting process can now be completed instantly or as quickly as 1-2 days. The use of artificial intelligence, proprietary algorithms, customer feedback, and background searches of multiple databases has allowed Life Insurance carriers to create a more elegant, non-invasive purchasing experience for customers. Some carriers allow exam-free, fluidless underwriting for up to $50 million of coverage. This is a win-win for everyone involved in the life insurance business.

Let First American Insurance Underwriters help you stay ahead of these trends and take advantage of the new tools and programs available. Contact your relationship manager or email internalsales@faiu.com to learn more.

— By Allan Gersten, Founder

It wasn’t long ago that buying life insurance was a painfully difficult process. If you were interested in buying a policy, first you had to talk to an agent, then a nurse would come to your house to draw blood. Finally, after filling out sheaves of paperwork, you would get a decision in sixty to ninety days.

Thankfully, those days have passed. But many consumers (and too many insurance advisors) are unaware that a revolution has taken place in the life insurance industry.

AI-powered accelerated underwriting now makes it possible for consumers to apply for and get approval for policies up to $3 million in less than a day. And the entire application process takes ten minutes or less.

The days of selling life insurance across a prolonged period characterized by frustration and delays are over.

And this is great news for insurance advisors. AI-powered accelerated underwriting hastens decision-making without sacrificing the quality of information or information analysis, meaning that you can get your leads approved and converted into paying clients faster.

Many insurance advisors are leaving money on the table because they aren’t talking to their clients about life insurance. Some simply don’t understand accelerated underwriting, others believe that their clients won’t be interested. Either way they are missing an opportunity and underserving their clients.

At FAIU, we understand that accelerated underwriting allows insurance advisors to be the hero to their clients. You aren’t there to scare clients into purchasing a product, you’re there to help them safeguard dreams—like sending a child to college, paying off a house, or ensuring that their family is cared for even if they are no longer around.

In the past, this was a hard sell compared to other forms of insurance. The introduction of artificial intelligence into the funding process has made it that much easier for sales professionals to pair clients with the right life insurance policy, while helping them set up a secure future.

And there’s more of this still to come. Artificial Intelligence is just getting started in the insurance industry, and the changes that are yet to come are sure to make our work even more streamlined, interesting, and relevant. The key takeaway from the rise of accelerated funding is that this technological innovation is changing the manner in which advisors strategize and do business, and the ways in which consumers engage with insurance products.

If you have not yet taken a close look at the merits of accelerated funding, now is the time to do so. It’s going to be good for your clients, and good for your bottom line if you familiarize yourself with the accelerated underwriting that is currently on the market. And we’re going to see more of this technology in the future, not less.

—  Ken Shapiro, President

Life is full of changes and never constant. Life changes can have a major impact on life insurance needs. A new baby, a new home, business investment, an empty nest, and financial windfall are just some of the reasons to initiate a life insurance policy review.

First American Insurance Underwriters helps our advisors provide professional recommendations that will put their clients in the best possible position to meet their Life Insurance goals. We have developed a Policy Review process to help you show your clients the best life insurance options to protect and provide for their family now and into the future. When analyzing insurance, we evaluate whether:

• Their current benefits are appropriate
• Their current policies are performing as intended
• Their current and projected premiums are cost competitive
• Whether any life events have changed their objectives
• Policy ownership is properly titled
• Beneficiaries are properly designated

What Does a Policy Review Entail?

We begin with a current as-is in-force illustration. The in-force illustration shows how the policy is performing based on dividends, interest, fees, and other policy costs that may have fluctuated since first purchased.

During a policy review, we also request information on:

• The current state of your client’s health
• Any goals or new objectives your client might have, such as higher death benefit, longer coverage guarantees, accumulating more cash value, or supplementing their retirement income.
• Policy ownership and beneficiaries

Finally, if a new or additional policy makes sense, we will provide you with a Policy Marketing Review (PMR) that provides a side-by-side summary of your client’s current policy and the recommended policy, so you and your client can quickly and easily compare the two. If your client’s current policy is performing as desired and cannot be improved upon, we will recommend that they do not make any changes. First American does this all at no cost to you or your clients.

What Are the Risks of Not Getting a Policy Review?

It is especially important to know what your client’s life insurance policy provides today versus what may have been intended when they first purchased it.

Some consequences of not performing periodic life insurance policy reviews may be:

• A policy lapsing prematurely
• An unintended death benefit shortfall
• Uncovered new or different client goals
• Insufficient Cash Values
• Loss of supplemental retirement income
• Door opening for another advisor
• E & O claim

At FAIU, we take pride in designing insurance policies to meet your clients’ goals, whatever they might be. We will help you grow your loyal client base and potentially uncover additional business opportunities.

Let us review your clients polices at no cost to you. Call Internal Sales at 781.4496800 or email internalsales@faiu.com

— By Dave Moore, Senior Case Design Specialist 

In the life insurance arena, we live in a different world than we did a year ago. Applications are up significantly, insurers have lifted most Covid underwriting restrictions, and opportunities abound. There has never been a better time for advisors to talk with clients about the unique planning benefits of life insurance.

The best opportunities are with advisors serving the affluent market. Why? Because there are fewer advisors with the ability to provide a comprehensive planning approach to clients. For many advisors, life insurance is an often misunderstood and neglected asset class. However, for those who understand how its unique properties can address the particular needs and concerns of highly affluent families, life insurance provides distinct solutions in protection, supplemental income, and tax advantages these clients appreciate.

The Remarkable Leverage of Life Insurance

These advisors understand that life insurance provides two critical types of leverage. The first is tax leverage because the death benefit is never subject to income tax or, if properly held outside of the estate, estate taxes. The second is its fundamental death benefit leverage. By redeploying some capital, clients can magnify their legacy assets by many multiples of that amount, giving them more financial capacity than they thought they had.

One of the best examples of capitalizing on life insurance’s tax and death benefit leverage is solving for unwanted required minimum distributions (RMDs). Many wealthy clients don’t need the income from their IRAs or 401(k)s, preferring instead to maintain them as legacy assets. The forced distributions and taxes paid on them result in a substantial loss of legacy value. Here’s how life insurance can be leveraged to solve that problem.

The client takes the RMD and subtracts the amount of taxes owed on it. The balance of each RMD is then redeployed into a life insurance policy. If the estate is projected to exceed the estate tax exemption, it would be best to own the insurance in an irrevocable trust. The effect of this strategy would be to create excess wealth that can expand the client’s legacy value and maximize it for their heirs with a tax- and estate tax-free death benefit. No other investment or planning vehicle can accomplish anything close to that.

For that matter, your philanthropic-minded clients could use the strategy of redeploying a portion of the capital assets they plan on committing to charitable causes into a life insurance policy, thereby multiplying their gift by a factor of three or four. For people who consider philanthropy a pillar of their financial plan, nothing could please them more.

Numerous Planning Opportunities

Numerous planning strategies can capitalize on the tax and death benefit leverage of life insurance, often making possible what can’t be done with any other vehicle, including:

• Equalizing an estate for children not participating in the running of a family business
• Keeping the estate whole for heirs by providing liquidity to pay estate taxes
• Providing liquidity to fund a buy-sell agreement or replace a deceased key person in the business
• Creating a tax-advantaged source of deferred compensation for executives

There’s no other planning tool where you can take 1 plus 1 and have it equal 3 or more. That’s the power leveraging life insurance can bring to planning solutions. Advisors in the affluent market can find those clients needing these creative solutions by taking a comprehensive approach in examining their circumstances, needs, and objectives. With our resources and planning expertise, FAIU can help you design the perfect solution.

By: Ken Shapiro, President

Life underwriters are seeing light at the end of COVID tunnel which means they are further lifting restrictions on issue ages, opening up the all-important senior market segment. Coupled with the lowest rates we’ve seen in a long time and peak interest in life insurance due to the pandemic, the stage has been set for a strong year in life insurance sales.

Though health conditions due to the Omicron variant of COVID continue to evolve, an increasing number of carriers are moving on from the restrictive guidelines that have been in place for nearly two years. While some carriers continue to keep a chokehold on older issue ages, many have opened underwriting to ages up to 80 but with some additional conditions, such as proof of vaccination, limited auto binding, and lower maximum coverage limits. The bottom line is for your elderly clients in relatively good health, there are life insurance solutions to be found.

A Rare Window of Opportunity

The timing couldn’t be better as seniors, largely ignored over the past two years, are motivated to get their estates in order and shore up their legacy needs. Life insurers are motivated as well, seeking to make 2022 a strong rebound year. As the year progresses and carriers continue to loosen their requirements, we expect more solutions to become available, expanding your opportunities in the senior market.

With First American Insurance Underwriters as your partner, you can have access to the broadest array of life insurance products available for any market. Send us your cases and we’ll work with you to find the best possible solution for your senior clients.

-By Allan Gersten, Founder

What do you do with estates of any size, holding substantial hard assets, such as a business or real estate, that must be split equally among heirs with disparate interests? We are sure you know that life insurance can become the great equalizer, ensuring each of the heirs gets equal treatment. Here are 2 ideas/examples that may interest you.

For Continuing the Family Business

A husband and wife own a jewelry store with one of their children participating as a key employee. The child has been helping his parents build the store into a successful enterprise and would be a natural successor to run the business. The business is worth about $8 million. The two other children have no interest in participating in the business.  The parents want to treat all the children equally when it comes to an inheritance. They have about $5 million in other assets that could be split between the other children however that would only provide them each with a $2.5M inheritance, far short of the $8 million value of the jewelry business being left to their sibling.

To equalize the inheritance, a very clean solution would be for the parent’s business to buy an $11 million insurance policy that would effectively give the 2 siblings not in the business $8M each and the sibling in the business 100% of the company valued at $8M.

For Preserving the Vacation Home

Another prevalent example is when real estate is involved. In this case, a husband and wife own a beach house in addition to their residence, worth about $2,500,000. Their home is worth about $1,500,000. One of their children loves the beach house as a place to bring her family several times a year. Their son lives on the other side of the country and has no use for the beach house. The parents would like to see the beach house remain in the family, so they could leave it to the daughter and give their son their personal residence to own, rent, or sell.

To make up the difference between the value of their residence and the beach house, they could purchase a $1,000,000 life insurance policy naming their son as the beneficiary.

For any of your clients with estates comprised substantially of hard assets, having a conversation about how to equalize the estate among children would be welcomed. Especially if it can keep the harmony and show their children they are equally loved.

FAIU has the resources and expertise to help you create a solution for an estate equalizer issue. We do the work and you become a true advocate for your clients’ legacy.

— By Tony O’Kussick, Director of Operations & Peter Kaplan, Vice President