Thursday, March 16, 2017

IUL: Cost Is An Issue Only In The Absence of Value

By: Charlie Gipple, CLU, ChFC, SVP Sales and Marketing at Partners Advantage Insurance Services, LLC

I had a mentor many years back who had done very well in financial services and had made a great deal of money. While I was talking with him one day on the phone, he brought up he had just purchased a Ferrari. At this point, me being fairly frugal and understanding there is no worse “investment” on earth than automobiles, I said, “what are you thinking buying a $200-$300k car? How can any car be worth this much money?” After firing back with a couple of choice words which I cannot put in this article, he told me a phrase I will never forget. He said “Charlie, cost is an issue only in the absence of value. Is this car costly to me? Yes. However, if to me the value eclipses the cost, why would I not buy it?”

The issue of cost is brought up very frequently during conversations around life insurance and especially permanent life insurance. Of course this is perpetuated by the pundits such as Suze Orman and Dave Ramsey who consistently make the blanket statement that permanent insurance is too costly and one should buy term and invest the difference. So, as I do indexed product boot camps across the country, my job is to educate the agents on why IUL is not so expensive if designed correctly and how the agents can explain this to their clients.

Learn more in the full white paper "IUL: Cost Is An Issue Only In The Absence of Value," by Charlie Gipple, CLU, ChFC.  Gain insights on how to show your clients tax advantage opportunities IUL policies offer and walk them through a hypothetical scenario that shows them IUL policies can be quite reasonable in price.

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For financial professional use only. Not for use with consumers.

Indexed Universal Life is not a stock market investment and does not directly participate in any stock or equity investments. Market Indices do not include dividends paid on the underlying stocks, and therefore do not reflect the total return of the underlying stocks; a market-indexed insurance product is not comparable to a direct investment in the equity markets. Clients who purchase IUL are not directly investing in a stock market index.
Pursuant to IRS Circular 230, Partners Advantage Insurance Services and their representatives do not give tax or legal advice and cannot be used to avoid tax penalties or to promote, market, or recommend any tax plan or arrangement. Encourage your clients to consult their tax advisor or attorney. The information contained in this article is not intended to serve as tax or legal advice and is not intended to provide financial or legal advice and
does not address individual circumstances.

Both loans and withdrawals from a permanent life insurance policy may be subject to penalties and fees and, along with an accrued loan interest, will reduce the policy’s account value and death benefit. Assuming a policy is not a Modified Endowment Contract (MEC), withdrawals are taxed only to the extent they exceed the policy owner’s cost basis in the policy and usually loans are free from current federal taxation. A policy loan could result in tax consequences if the policy lapses or is surrendered while a loan is outstanding. Distributions from MECs are subject to federal income tax to the extent of the gain in the policy and taxable distributions are subject to a 10% additional tax prior to age 59½, with certain exceptions. These characters are fictional and are not actual customers. Your own decisions should be made in light of your own financial situations. This hypothetical examples used are for illustrative purposes only, is no guarantee of return or future performance, and does not depict the actual performance of a specific product or its investment options.