3 Types of Clients: Financially Independent
Over the next three weeks we will be exploring the 3 categories of clients based on their life insurance needs. In this three-part series we will be discussing how you can bring value to each one.
Client type number 1: Folks that have life insurance, but it is no longer needed. We call the clients the Financially Independents.
We ask you to take a moment and think about a few of your most significant clients. As their most trusted advisor, have you provided value to these folks in the life insurance area? If you don’t, someone else will. TDC Life has built a business around supporting professional advisors like you to make it EASY to help you bring smart ideas and solutions to your clients in this area. Stay tuned to learn about all 3 types of clients...
These clients have self-insured their risk of death or their lives have evolved in a way that their original need for life insurance has disappeared or changed.
Here are some examples of these clients:
- Retiring Corporate Executives: have built financial independence for retirement, their risk of loss of income is gone but they may have another need. Read on to learn more!
- Business Owners Selling or Have Sold: These folks likely had life insurance to protect the business, see below for smart ways to drop this life insurance.
- Clients Without an Estate Tax: The goal of most of our clients is to disinherit the IRS. Those who have been successful may not need the life insurance they had purchased to pay the estate tax. Many of these clients are philanthropic and this life insurance can be used charitably. The strategy is detailed below.
- And many more...
So, what to do if your client falls into one of these categories? Surrendering the policy sooner rather than later will mean that the client will save on premium and preserve policy cash value (if there is any). However, there are over 10 things for a client to consider before simply surrendering a policy. Many of these are not well known by clients (and many advisors) so it is imperative for you to bring them up.
Here are a few examples:
- Sell the policy for cash: In a transaction called a life settlement, many life insurance policies can be sold for something less than the death benefit but more than the cash value. On average, our clients get 30% of the death benefit in a sale. To learn more about this strategy, read this article originally published to Forbes.com. Today is a seller's market and policies that may not have worked in the past are sellable today. Examples include:
- Convertible term insurance
- Folks in their 60's (historically you needed to be older)
- Insurance companies that are not in good financial shape
- Donate the policy to charity: Not for profit organizations are starting to see the value in life insurance and may be willing to accept a policy as a donation. Typically, these donations can mean a significant charitable tax deduction and doing a lot of good for a cause the donor cares about. TDC Life has a consulting arm for charitable organizations using life insurance. If your client’s charity of choice does not embrace gifts of life insurance we can help. CONTACT US.
- Repurpose for Long Term Care: Cash value in a life insurance policy can be given a new life in new types of policies called “hybrid long term care policies.” These policies can be used to help pay for long term care and, if the insured never needs care, will pay out a death benefit to their family. A win-win strategy.
- And many more like basis rescue, death benefit reductions...
No matter the situation, any client planning to drop life insurance should have it professionally reviewed. The Team at TDC has a proven process to make these reviews impactful, easy and with no disruption to existing relationships. Our team will explore the ideas listed above and many more to ensure your client is not leaving value on the table. With current policy statements and some basic client information we can provide a review to your client. No cost, risk or expectation the client will do anything more with TDC Life!
We hope that this profile has triggered a client situation in your mind where you can bring more value and deepen the relationship with minimal work on your part. Stay tuned next week for client type number 2!
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