NG Employee Benefits Savings and Insurance (NGEB-IUL)

Employee Benefit & Savings Program

I was told or I have heard from various sources that Cash Value Life Insurance or IULs are not a good option … as a producer of IULs – what are your thoughts?

At NG Employee Benefits, we appreciate people sharing their thoughts and concerns as they relate to various employee benefits / savings options. When needed, we also stand ready to objectively outline and present related facts and information. A few thoughts that may be considered in response to such an inquiry as outlined above may include:

  • Most financial advisors are excellent at what they do and they do a fine job. But in order to sell a savings / life insurance product such as an IUL, an individual must be licensed. Many financial advisors are only licensed to sell securities and stocks and not benefit plans that combine tax – advantaged savings with life insurance.
  • As a result, many financial advisors who are not licensed to sell plans that include a life insurance component, are not familiar with cash value products such as IULs and therefore are not willing and or able to offer these products as options to those that they advise.
  • Another factor that has come into play includes the stock market crashes of the early 2000s and 2008.  Many who experienced the effects of these market downturns were left without the opportunity to wait for the market to recover.
  • With the subsequent increased interest and rapid growth in cash accumulation or cash value products such as IULs that offer tax-advantaged growth and upside market potential without the risk of suffering from market losses – much of the related industry attention has been focused on these promising and highly capable options.

I was told or have heard from various sources that IULs or Cash Value Life Insurance has too many moving parts and is way too complicated … Is this true?

The following four main points may assist in a basic understanding of Indexed Universal Life insurance (IULs):

  • Basically, IULs have three components: a premium amount, a savings element and a death benefit.
  • Components of the life insurance policy (premium, savings element and death benefit) are flexible and can be altered depending on the policy holder’s premium, savings and or death benefit goals / preferences.
  • IUL account values are indexed off of indices such as the S&P 500. Principle and interest gains are annually locked in and are contractually protected against any risk or loss (0% Base or Floor).
  • Under Section 7702 of the Internal Revenue Code – the savings or account value portion of the policy is able to grow tax-advantaged as long as the policy stays within Section 7702’s definition of Life Insurance.

“Why should I consider a benefit plan that combines savings with life insurance such as an IUL? … Why should I consider life insurance when I may not even have any dependents?”

This is a great question. Because the savings element / portion of an IUL is combined with permanent life insurance, annual interest credited to accounts is able to grow tax-advantaged under Internal Revenue Code 7702.

Also, according to the American Psychological Association, In Western cultures, more than 90% of people marry by age 50. Even though an individual may not have dependents now, chances are – someday they will. This is an important consideration because while an individual is younger, they usually are healthier and have a better chance to qualify for life insurance at a good class rating. Also, there are those who develop health problems later on in life and find that they may not qualify for the amount of life insurance they would like, may not qualify for very much, or qualify at all.