Adding Value

Advising client’s on the proper Life Insurance Implementation!

Successful individuals and families typically use Life Insurance as a backstop for their financial plans in both the accumulation, career stage, and then the distribution stage. Being well informed on the options will be a big assist for your client.

There are 2 defining issues – Read on

Implementing the proper life insurance for a client regardless of their stage in life is no different than the decision of any investment. There are 2 primary issues:

1.) The time horizon

How long does the coverage need to last? Is it 20 years? Or is the need for coverage permanent? The time horizon will dictate the type of policy to be implemented and is the first step in proper execution. In a traditional execution a younger client would suggest a large portion of total coverage be a short term policy (20 years). At the older ages when, much of the success has been achieved, the larger portion will more than likely be permanent insurance protection.

2.) Appetite for Risk

If you are implementing a policy for a specific term such as 20 or 30 years, there should be no risk, but based upon the amount of coverage, choosing large, well rated companies is wise. Additionally if the policy is >$10m, consider hedging the implementation by using two insurers.

For permanent life insurance placements, risk is the second driver. There are “fully guaranteed” products where the evaluation of insurers is similar to selecting a term product above.

On the opposite extreme is a “Variable Life” contract where the owner has input on the investment strategy and allocation. There are minimal guarantees in Variable Life policies and the outcome of the policy is driven by the performance of the investment of the cash value, which is fully controlled by the policy owner.

In between a fully guaranteed policy and a minimal guarantee Variable Life policy there are a manageable list of policy types. Whether you are reviewing Whole Life, Universal Life, or Indexed Universal Life, the decision comes down to your appetite for risk and the ultimate performance of the contract.

Each individual implementation should be customized to the individual needs of the insured, and or the owner, to be certain that the proper decision is made that works for the duration of the contract.

If you have questions on which product is best, call Steve at 203.698.9341 or email sshepard@shepardinsgrp.com.