Indexed GUL Provides the Flexibility for Your Clients' Changing Needs

  • Originally published May 8, 2013 , last updated January 6, 2016
Indexed GUL Provides the Flexibility for Your Clients' Changing Needs

Nowadays, clients are seeking life insurance policies that offer security, flexibility and the opportunity to accumulate cash value. Clients buy life insurance to protect their estates, meet their long-term needs and leave a legacy to their heirs. For many, flexibility is a must because as their lives change, so do their needs. They might need to take a distribution to provide for unexpected medical expenses or to help pay for their children’s college education.

Indexed Guaranteed Universal Life offers your clients the flexibility and opportunity for cash accumulation. Indexed GUL provides your clients with long-term guarantees and the ability to accumulate significant cash value. For many clients, this is a much better option than the non-indexed fixed GUL that features lower premiums but offers little or no cash value growth and limited flexibility.

Case Study

Take a look at these case studies from North American Company explaining the benefits of their Guarantee Builder IUL that accumulates cash value as opposed to their Custom Guarantee, a non-indexed fixed GUL.

For the absolute lowest cost, your option will almost always be Custom Guarantee, but the dollar cost of the premium is not the only cost. Traditional GUL products give us more death benefit for less out-of-pocket dollars than ever before, but there are other costs paid. One of them is flexibility. Twenty-five years out, when this client is 65 and possibly looking to retire, he may decide that he doesn’t need the coverage, doesn’t need as much, might need the $3,000 per year for something else, etc. At age 65 he has paid almost $80,000 in premium into this plan. At that point if he wants to get anything out of it, he has only 2 options: keep paying or die. There is no cash value, so there is no flexibility. Here is an illustration showing this case study showing Guarantee GUL.

With Guarantee Builder IUL the exact same coverage will cost him $312 more per year, or $26 more per month. At age 65, he will have paid $88,000 in premium into this plan. However, instead of no cash value and no flexibility, he will have more than $100,000 in flexibility. He could surrender the policy, pay tax on the gain and still have more than he originally paid in. He could stop paying premium and let the policy run off of the cash value. He could take income of ~ $9,000 – $10,000 per year and fund a med supp plan, a prescription drug plan or a LTC policy. Bottom line, he has $100,000 worth of flexibility; that’s the power of cash value. Here is an illustration showing this case study showing Guarantee Builder IUL..

How to Position the Guarantee Builder IUL

First ask your client if they are contributing to a savings plan on a monthly basis. Most will say that they are or would like to be. So position the Guarantee Builder as not only guaranteed life insurance, but also a savings plan. In the above study, $26 per month equals more than $100,000 in 25 years, assuming a 7% interest rate. If they were to take the same $26 per month and put it into a savings account, they would have to average better than 20% in order to get $100,000 after taxes. For an annuity, they would they need to average better than 15% in order to get $100,000 after taxes. We of course aren’t currently seeing those rates.

Up-Sell Advantages to You as an Agent

In addition to providing your client with competitive guaranteed life insurance coverage and an exit strategy, the Guarantee Builder has higher target premiums and pays 5% more compensation at the street level. On this scale alone you could make $3,010 on the Custom Guarantee, but on the Guarantee Builder you could make $3,322, an additional $312 or 10%. If you write only one of these per month, that is potentially another $3,744 you could make this year just by the “up-selling” from the Custom Guarantee to the Guarantee Builder.

With the combination of security, flexibility and opportunity to build cash value, indexed GUL products can give your clients peace of mind and gives you get higher commissions.