Making it "real" for clients

Making it "real" for clients 

By Tom Wall, Ph.D., MBA, MSFS, CLU, ChFC

As a financial advisor, you know that helping your clients understand complex financial concepts is crucial to their success. One of the most misunderstood assets may be participating whole life insurance due to its unique features and structure. However, by drawing parallels to real estate, an asset class that many of your clients are already familiar with and generally agree is a good thing to own, you may create some ah-ha moments for your clients. 

The death benefit is the “asset,” as it’s only a matter of time before that becomes real wealth for beneficiaries.  The cash value can be thought of as equity in that asset, or the amount of money that is accessible to the owner.

“Mr. or Mrs. Client… would you buy an asset that works like this?” 

Fixed, guaranteed payments for a defined period

Once payments are complete, you own the asset without further obligation

Builds equity over time with minimum guaranteed increases and uncapped upside potential

Access to that equity at any time without penalty

Up-front closing costs that require buyers to have a little patience

The ability to reduce or eliminate payments in favorable interest rate environments

Consistent and predictable growth over time

No taxes due as it grows in value

Generally protected from creditors

A dependable source of income in later years

But wait, there’s more!  Once your clients understand the basic concept, you can highlight the unique advantages that participating whole life insurance offers beyond the real estate parallel:

If the policyholder dies, the full value (death benefit) is passed on to their beneficiaries tax-free, and any unmade payments are no longer due.

If the policyholder becomes disabled, their payments are waived, but their equity continues to build.

Upon retirement, the policy can help to provide tax-free income or help fund long-term care expenses.

By presenting participating whole life insurance in a relatable context, you can help your clients make informed decisions about their financial future. They'll better understand how this tool can complement their existing portfolio, provide protection for their families, and offer unique tax advantages.  Furthermore illustration software commonly allows you to export values into excel, which can generate visual representations of the numbers.  By showing a chart like the one below, they may better understand the long-term value.