Many agents who use indexed universal life insurance in retirement supplement sales frequently solve for the minimum death benefit in order to reduce mortality charges for the client. However, by limiting the main purpose of the policy to the potential future income stream, you are undervaluing and underselling one of the top benefits of life insurance: the death benefit.
There are generally two periods during which the death benefit has excellent value in retirement supplement cases: pre-retirement and post-retirement.
While clients are in their working years, there may be a crucial life insurance need for the surviving spouse. Often times, households are seriously financially crippled by the loss of a wage earner. Though protection may partially be found in term or group life insurance benefits, universal life may offer more. One key advantage of universal life insurance is the cash value buildup, which exists in many retirement supplement concepts. It is not, however, the only advantage.
What sets universal life insurance apart from other retirement supplement concepts is the death benefit. Accepting the lowest possible death benefit in your retirement supplement cases weakens the protection your clients may need.
While many understand the value of life insurance during the working years, few recognize the benefit during the retirement years. The value life insurance provides post-retirement is in the financial leverage. Life insurance leverages the cash surrender value designated for retirement income into a larger benefit at death. Though we may show income streams on illustrations to age 100 or beyond, the fact is that very few clients live to that age. Therefore, life insurance can convert the remaining cash surrender value into a larger death benefit for a surviving spouse or heirs--generally income tax free.
It's simple. Ordinarily, remaining cash surrender value in a qualified retirement plan would be subject to sizeable taxes. With life insurance, heirs get the value leveraged to a larger amount, usually without the heavy taxes.
The retirement supplement concept is much more than just an income stream. The death benefit is an advantage that shouldn't be undervalued to your clients. It could provide them with more protection than just supplemental retirement income, it benefits heirs, and it benefits you with a larger commission.