Permanent life insurance offers more than a death benefit. So why don’t more of your clients know about those advantages?
A permanent life insurance policy offers benefits beyond a payout to help a family survive the financial loss of a core provider. A recent survey from Allianz Life, however, reveals that many Americans are unaware of those benefits.
While nearly 90% of the respondents cited the death benefit as the main advantage of life insurance, a surprising 66% didn’t know that those payments come tax-free. Further, only about half knew that they had the option to withdraw money from the policy to fund other financial obligations such paying for college tuition or supplementing retirement income.
Nevertheless, when asked what they would look for in a financial product, the vast majority pointed to something that provides tax-free money for retirement or other funding needs, as well as loans for college. The failure to connect those benefits with a life policy means that, as an insurance agent, you have an opportunity to inform your clients and prospects on all the benefits of a life insurance contract.
Retirement Income Growth
Investing in a permanent life policy enables the policyholder to diversify his or her retirement income portfolio. With interest rates currently low, the investor can typically secure a rate higher than bonds without being stuck with a financial vehicle that generates low returns. Those extra dollars could come in handy when the policyholder decides to dip into the cash value for retirement income or other needs.
If an urgent financial need arises, the policyholder has the option of taking out a loan or a withdrawal against the cash value of the contract. The policyholder can then repay the loan and interest charges to maintain the death benefit amount and the cash value. An unpaid loan, however, reduces the death benefit. Policyholders may decide to take a withdrawal without an interest charge, but that could affect the premium and death benefit.
Long-Term and Chronic Care
A policyholder suddenly struck by a chronic illness may tap into the policy to pay for long-term care or assistance for daily living activities. Such payments usually equal about half of the death benefit, so the policyholder doesn’t completely lose that amount. Depending upon the contract, these living benefits are either written into the policy or added as a rider. Insurance agents can present their clients with either alternative.
The public assumes that the only benefit of a life policy is the death benefit. Although that payout is important, there are many other “living” benefits, too. Unlike a term life policy, which only provides a death benefit, permanent life insurance affords the policyholder the ability to pull out funds when needed for loans, retirement income, and long-term care. As an insurance agent, you can provide peace of mind to your clients by educating them on those benefits.